During the intense sell-off in early August, most stocks in the market were not spared, but some key stocks held up well, showing that the importance of fundamentals cannot be ignored.
At the beginning of August, after experiencing a brutal decline, the market has some hopeful bright spots.
August is the cruelest month. Although growth stocks, especially technology stocks, have attracted attention in this month's brutal crash, the market has also suffered a lot. However, the highlights of some stocks show that fundamentals are still important.
At the end of Monday's trading day, the S&P 500 and Nasdaq Composite indexes fell 6.1% and 8%, respectively, the largest three-day percentage drop in over two years. The first two trading days of August were the worst start for the S&P 500 index since 2011 and the worst for the Nasdaq index since 2008.
However, the situation was worse on Monday this week. At the close of the day, funds such as the Health Care Select Sector SPDR Fund and the Invesco S&P 500 Low Volatility exchange-traded funds (Invesco S&P 500 Low Volatility ETF) that could barely maintain their gains in the previous week's market volatility showed losses this week. Only Utilities Select Sector SPDR (SPDR Utilities ETF) and Consumer Staples Select Sector SPDR ETFs (SPDR Necessities Consumer ETF) approached the break-even point in these three days. Kellanova (K.N) was the best-performing stock in the S&P 500 on Monday due to its acquisition hopes, which did give the latter a boost, but the stock is not in the top 25 holdings of the fund and has a weight of only 0.8%.
Even though this downturn has inflicted heavy losses on almost all stocks, investors are still opting for safe sectors, rather than completely abandoning stocks, indicating that market sentiment has not completely turned extremely bearish.
That's why investors are giving returns to companies with good news during the market downturn. Usually, even strong financial reports or other bullish news would be overshadowed by avalanches of sell-offs, but that was not the case for some stocks last week.
Last Friday, Barron's pointed out that positive financial reports helped some stocks fall against the market trend. Among the five best-performing stocks in the S&P 500 index in August's first two days, Robinson Worldwide (CHRW.Q), Laboratory Corp of America (LH.N), Teleflex (TFX.N), Clorox (CLX.N), and Kellanova (K.N), all received returns due to optimistic financial reports. Even in Monday's market crisis, these stocks remained resilient: in the first three trading days of August, these five stocks all entered the top ten of the S&P 500 index, and their returns all exceeded 5%.
Due to mixed financial reports and concerns about high costs for AI investments, large-cap tech stocks are having a tough time. However, investors are not scared away from profitable winners. For example, DoorDash (DASH.N) was the best-performing stock in the Nasdaq 100 index on Monday, up 3.5%; this means it further increased after a solid financial report was released on Friday morning and rose nearly 10% in the first three trading days of this month.
Fundamentals have also boosted other stocks. Since Barron's recommended it in March, Mercadolibre (MELI.O) has risen more than 20%, jumped after reporting encouraging results last Friday, and almost no fluctuations on Monday, making it the third-best-performing stock in the Nasdaq 100 index in August's first three trading days. AMD was the third-best-performing stock on Monday, up 1.8%, as investors were willing to bet that Intel's (INTC.O) market share losses would boost the company's earnings.
Admittedly, the first three trading days of August were not good news for investors. However, Tuesday's market rebound and the positive response of investors to bullish news indicated that the early downturn was more of a typical sell-off after a massive rebound in growth stocks, rather than a warning of more widespread losses.