Small Cap Rotation

Small Cap Rotation

DIA futures rose by 36 points, or approximately 0.1%, while S&P 500 and Nasdaq 100 futures also saw gains of 0.1% as the small cap rotation continues. This follows a strong performance on Monday, where the Dow advanced to record levels, and both the S&P 500 and Nasdaq posted gains. However, the rally has quickly become very extended with the T20 indicators suggesting the odds of a little rest or pullback have grown.

By 11:17 a.m. London time, the pan-European Stoxx 600 had declined by 0.39%, with all sectors and major bourses experiencing losses. Mining stocks were the hardest hit, dropping 1.89%, followed by the insurance sector, which fell by 1.12%.

Asia-Pacific markets exhibited mixed performance on Tuesday, influenced by a series of political and economic updates from the United States. Investors are also keenly observing China’s Third Plenum, where discussions are expected to focus on addressing high local government debt and promoting advanced manufacturing.

Economic Calendar

Earnings Calendar

Notable reports for Tuesday before the bell include BAC, MS, PNC, PGR, STT, & UNH.  After the bell include FULT, HWC, IBKR, JBHT, OMC, & PNFP.

News & Technicals’

President Biden expressed regret over his use of the phrase “put Trump in the bulls-eye,” which he mentioned to donors in a private call shortly before an attempted assassination of Donald Trump. Several Republican lawmakers have criticized Democratic campaign rhetoric, including Biden’s comment, for potentially inciting the incident. Biden clarified that he has never intended to incite political violence, emphasizing what he perceives as a stark contrast to Trump’s approach.

Apple has unveiled a preview version of its upcoming iPhone update, iOS 18. This beta version, available ahead of the official fall release, allows Apple enthusiasts and developers to explore and test the latest features. Notably, this year’s most significant new service, Apple Intelligence, is not included in the public beta. Apple has announced that users will have the opportunity to try out Apple Intelligence later this summer, adding to the anticipation surrounding the new update.

Federal Reserve Chair Jerome Powell highlighted that central bank policy operates with “long and variable lags,” explaining why the Fed would not wait for its inflation target to be fully achieved before taking action. Powell emphasized that the central bank seeks “greater confidence” that inflation will return to the 2% level. The Fed’s next policy meeting is scheduled for the end of July, where further decisions on monetary policy will be discussed.

As tech tensions between the U.S. and China escalate, vast networks of underwater cables have emerged as a new point of contention in international relations. These subsea cables, which carry 99% of the world’s data traffic, are crucial to the global internet infrastructure. The U.S. government has reportedly cautioned tech giants like Google and Meta about the potential vulnerability of undersea cables in the Pacific to Chinese espionage. This development underscores the growing complexities and security concerns in the digital age.

As we ramp up in earnings expect price volatility to continue to expand and the small cap rotation to continue.  Keep in mind we have a major distraction over the next two days due to Prime day shopping events across many retailers.  This at times create choppy market conditions so plan accordingly.

Trade Wisely,

Doug

Bulls Continue to Run

Bulls Continue to Run

Stock futures gap higher as the bulls continue to run after investors assessed the implications of the assassination attempt on former President Donald Trump and prepared for a significant week of corporate earnings reports. The Dow Jones Industrial Average futures increased by 204 points, or 0.51%, while S&P 500 futures rose by 0.43%, and Nasdaq 100 futures gained 0.5%. This uptick reflects cautious optimism in the market despite the political turmoil.

European declined to begin the week by 0.12%, with all major indexes and most sectors experiencing losses. Utilities were the hardest hit, dropping 0.91%, while basic resources followed closely with a 0.83% decrease. This broad-based downturn reflects widespread market challenges across Europe.

China’s economy experienced a growth rate of 4.7% in the second quarter, falling short of the 5.1% expansion forecast by Reuters and marking a decline from the 5.3% growth recorded in the first quarter. Meanwhile, Australia’s S&P/ASX 200 index achieved a historic milestone by surpassing the 8,000 mark for the first time, closing at 8,017.6 with a 0.73% increase.

Economic Calendar

Earnings Calendar

Notable reports for Tuesday before the bell include BLK, & GS.  After the bell include CFB, FBK, & SFBS.

News & Technicals’

Goldman Sachs is set to release its second-quarter earnings before the market opens on Monday. Analysts surveyed by LSEG anticipate earnings per share of $8.34 and revenue of $12.46 billion. Following the earnings release, company executives will hold a call with analysts at 9:30 a.m. ET to discuss the results and provide further insights into the financial performance and outlook.

Google is reportedly in advanced negotiations to acquire the cybersecurity firm Wiz for $23 billion, according to sources cited by The Wall Street Journal. If finalized, this acquisition would mark Google’s largest ever, underscoring its strategic push into the cybersecurity sector. The deal is expected to be completed soon, reflecting Google’s commitment to enhancing its security capabilities amid growing digital threats.

Burberry announced that if the current trading slowdown persists, it anticipates an operating loss for the first half of the year and a full-year operating profit below the current consensus. As a result, shares of the 168-year-old British luxury brand plummeted by 15.4% as of 9:54 a.m. London time. In response to these challenges, the company suspended its dividend and appointed Joshua Schulman, formerly of Michael Kors and Coach, as the new CEO, with Jonathan Akeroyd stepping down immediately.

Swatch Group reported a significant decline in first-half sales and earnings on Monday, attributing the downturn to weaker demand for luxury goods in China, including Hong Kong and Macau. Despite the overall slump, the Swatch brand managed to defy the trend, achieving a 10% increase in sales in China. This performance highlights the brand’s resilience amid challenging market conditions, even as the broader company faces headwinds in one of its key markets.

As we look ahead to a busy week as the earnings season ramps up the bulls continue to run pointing to a substantial gap up open.  Gapping to new record highs can create some big point whipsaws so plan your risk accordingly.  Expect volatility to increase over the next several weeks as the market reacts to all the earnings data coming our way.

Trade Wisely,

Doug

Inflation Report

Inflation Report

U.S. stock futures edged slightly lower early Thursday, with a cautious stance as traders as braced for the inflation report. The high anticipation centers around the June consumer price index and the ramifications it will have on future interest rate decisions. Economists polled by Dow Jones have set their expectations for a modest increase of 0.1% month-over-month. On an annual basis, the CPI is projected to rise by 3.1% compared to the same period last year.

European markets rallied Thursday morning, with indices across the region climbing as investors anticipate the forthcoming U.S. inflation data. The upbeat mood was bolstered by flash figures indicating that the U.K. economy expanded by 0.4% in May, a welcome recovery following a stagnant April and surpassing the modest 0.2% growth anticipated by analysts. This economic uptick was mirrored in the currency market, where the British pound appreciated by 0.21%, reaching its highest valuation against the U.S. dollar in the past four months.

The Japanese market saw significant gains, with the Nikkei 225 index climbing 0.94% to close at 42,224.02. This surge was largely attributed to a strong performance by technology stocks. Similarly, the broader Topix index also rallied, rising 0.69% to reach a new peak of 2,929.17. South Korea, the Kospi index increased by 0.75%, as the Bank of Korea maintained its interest rate at 3.5%. The tech-centric Kosdaq index modestly rose by 0.11%.

Economic Calendar

Earnings Calendar

Notable reports for Tuesday before the bell include DAL, & PEP.  After the bell we have no notable reports.

News & Technicals’

PepsiCo’s financial performance in the second quarter presented a mixed picture, as the company fell short of Wall Street’s revenue expectations. This shortfall was primarily due to a decrease in volume across its three North American business units. In light of these results, PepsiCo has adopted a more conservative stance regarding its sales forecast for the entire year, signaling a cautious approach amid uncertain market conditions. Despite the revenue setback, the company managed to surpass earnings estimates for the quarter, indicating that while sales volume may have declined, profitability metrics and cost management strategies could have yielded better-than-expected outcomes. This divergence between revenue and earnings highlights the complex challenges and operational efficiencies within PepsiCo’s business operations.

The U.S. Treasury Department and the Internal Revenue Service (IRS) have reported a significant milestone in tax collection efforts, having recovered over $1 billion in tax debt from high-income individuals in the past year. This achievement underscores the government’s intensified focus on ensuring tax compliance among the wealthy. In a strategic move to bolster these efforts, the IRS announced in September its intention to heighten scrutiny on individuals earning in excess of $1 million per year who have substantial tax debts exceeding $250,000. This initiative represents a concerted push to enhance the integrity of the tax system and address the tax gap by targeting those with the highest earning brackets and significant outstanding tax obligations. The announcement serves as a reminder of the IRS’s commitment to fair tax enforcement and the importance of compliance with tax laws.

In a landmark decision, EU antitrust regulators have endorsed a set of commitments from Apple, marking a significant shift in the tech giant’s approach to its contactless payment technology. This development paves the way for competitors to access Apple’s tap and go payment system, potentially altering the landscape of digital payments in Europe. EU antitrust chief Margrethe Vestager highlighted the move as a pivotal change that promises to enhance competition and consumer choice. This announcement follows the European Commission’s initiation of an antitrust probe concerning Apple Pay back in 2020, reflecting the EU’s ongoing efforts to ensure fair competition in the digital market. The acceptance of these commitments by Apple indicates a willingness to comply with regulatory standards and could set a precedent for other tech companies operating within the EU.

The highly anticipated inflation report and the jobless claims with likely set the tenor for today’s trading. Will the reaction follow-though with the bullish surge the ended the Wednesday session or, will the bears find reason to whipsaw the indexes back down?  Buckle up we will soon find out so plan your risk carefully.

Trade Wisely,

Doug

Volatile Price Action

Volatile Price Action

U.S. stock futures took a downward turn on Tuesday morning in yesterday’s volatile price action where the bulls were once again unable to hold early gains. Federal Reserve Chair Jerome Powell is scheduled to address a policy panel at the European Central Bank Forum at 9:30 a.m. ET. Additionally, the release of the May job openings and labor turnover report will provide further clarity on the state of the U.S. labor market. Investors are also looking ahead to Friday, when the June jobs report.

The European markets trade red this morning, with the Stoxx 600 index declining by 0.57% as of 11 a.m. in London. Inflation data from the euro area provided a mixed picture; while headline inflation experienced a decrease to 2.5% in June, as reported by the European Union’s statistics agency, core and services inflation figures remained elevated at 2.9% and 4.1% respectively.

Asian markets, the Nikkei 225 surged past the 40,000 thresholds, a peak it hadn’t reached in the previous three months. Conversely, the Topix index narrowly missed setting a record for its all-time closing high. The Japanese yen experienced a significant dip, sliding down to 161.67 against the US dollar, marking its weakest position in nearly four decades. Meanwhile, in South Korea, the Kospi index closed 0.84% lower. Across the waters, Hong Kong’s Hang Seng index saw a modest rise of 0.33, and the Australian market witnessed a slight downturn, with the S&P/ASX 200 dropping by 0.42%.

Economic Calendar

Earnings Calendar

Notable reports for Tuesday before the bell include MSM, & RDUS.  After the bell include SLP.

News & Technicals’

The U.S. stock market has witnessed a significant shift in its composition over the past decade, with the 10 largest companies now representing more than a third of the S&P 500 stock index, compared to just 14% a decade ago. This change has been largely fueled by the meteoric rise of technology giants, often referred to as the “Magnificent Seven”: Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia, and Tesla. Their combined market capitalization has soared, driven by widespread tech enthusiasm and their increasing influence on consumers and businesses alike.

This concentration has sparked a debate among market observers. Some experts express concern that such a heavy weighting towards a handful of tech behemoths could expose investors to heightened risks, particularly if these companies face regulatory challenges, shifts in technology, or changes in consumer behavior. On the other hand, some analysts argue that this concentration is not worrisome, pointing to the companies’ robust earnings, solid growth prospects, and the fact that they are at the forefront of innovation and market trends.

The divergence in opinion highlights the complexity of market dynamics and the challenges in predicting the impact of market concentration. While the dominance of these tech giants is clear, the long-term implications for the market and investors continue to be a subject of intense scrutiny and debate. Whether this concentration is a harbinger of risk, or a non-issue will likely depend on future market conditions, regulatory environments, and the companies’ continued ability to innovate and adapt.

The political landscape in the UK has been dominated by a singular narrative since Conservative Prime Minister Rishi Sunak announced a general election in May — the forecast of a sweeping victory for the Labour Party. Voter polls have consistently shown a significant advantage for the Labour Party, suggesting a lead of approximately 20 points over the Conservative Party. Despite this, the Labour Party has maintained a cautious stance, refraining from commenting on these projections. Their reluctance is rooted in the understanding that polls can be volatile, with results that can “vary and fluctuate.” This measured approach reflects a broader awareness of the unpredictability inherent in political campaigns and the potential for last-minute shifts in public opinion. As the election draws nearer, all eyes will be on whether the Labour Party can convert their lead in the polls into actual votes and possibly reshape the UK’s governing body.

Iran’s political arena is set for a pivotal moment with a runoff election scheduled for Friday, July 5. This election features a stark contrast between a right wing hardliner and a reformist candidate, reflecting the nation’s deep divisions amidst severe economic, social, and geopolitical pressures. The initial round of voting saw a historically low turnout, with only about 40% of eligible voters casting their ballots. Despite the low participation, the results were telling reformist Masoud Pezeshkian emerged as the frontrunner, securing 10.4 million votes out of the 24.5 million total votes. Close on his heels was the hardline candidate, Saeed Jalili, a former nuclear negotiator, who garnered 9.4 million votes. The outcome of this runoff has the potential to significantly influence Iran’s future direction, as the two candidates offer vastly different visions for addressing the nation’s challenges.

In another day of volatile price action, the bulls were unable to hold early gains.  Although the DIA, SPY and QQQ remain in bullish patterns there are hints the bears could be waking up from a very long slumber.  However, the low volume of a holiday week adds to a lot of uncertainty on the path forward.  Plan your risk carefully and have a plan to protect yourself if the bears do suddenly decide to attack.

Trade Wisely,

Doug

Holiday Shortened Week

Holiday Shortened Week

As the second half of 2024 commences, investors are gearing up for a holiday shortened week. The week could be eventful, with the anticipation building towards Friday’s release of the June jobs report, which is expected to provide significant insights into the current state of the labor market. Preceding this, the S&P PMI manufacturing and ISM manufacturing data for June will be disclosed on Monday. Additionally, May’s construction spending figures are also slated for release, potentially impacting market movements.

Europe’s Stoxx 600 index experienced a modest recovery, climbing 0.45% by mid-morning and breaking a streak of four consecutive losses. This uptick was largely fueled by a surge in France’s CAC 40 index, which saw an initial spike of over 2.5%, later stabilizing to a 1.3% increase.

China’s (PMI) for manufacturing held steady at 49.5 over the weekend, mirroring the figure from May and signaling a continuation in the sector’s contraction for the second consecutive month. Meanwhile, Japan’s economic outlook has been adjusted to reflect a deeper downturn than initially reported. The country’s Gross Domestic Product (GDP) for the first quarter was revised downward, showing a contraction of 2.9% year-on-year.

Economic Calendar

Earnings Calendar

There are no notable reports on this Monday.

News & Technicals’

Google is set to make a significant leap in renewable energy investment by partnering with BlackRock to develop a 1 gigawatt solar capacity pipeline in Taiwan. This initiative, announced on Monday, is part of Google’s broader strategy to enhance energy capacity and reduce carbon emissions, particularly in light of the growing demands of the artificial intelligence industry. The collaboration involves a capital investment in Taiwanese solar developer New Green Power, pending regulatory approval, which aims to expedite the construction of a substantial solar infrastructure. A segment of this new solar capacity is designated to supply power to Google’s data centers and cloud region within Taiwan, aligning with the company’s commitment to sustainable operations and its goal of achieving net-zero emissions by 2030. This move not only underscores Google’s dedication to environmental stewardship but also reflects the tech giant’s recognition of the critical role that green energy plays in supporting the technological advancements of the future.

In a strategic move to consolidate its manufacturing process and address ongoing safety concerns, Boeing has announced its intention to acquire fuselage manufacturer Spirit AeroSystems. This decision follows a significant leadership overhaul at Boeing, which was prompted by a serious incident where a door panel detached midflight from a nearly new Boeing 737 Max 9 jet. The acquisition, valued at approximately $4.7 billion, is seen as a step towards improving the quality and safety of Boeing’s aircraft, as both companies have faced challenges in eliminating manufacturing defects on the 737 Max, Boeing’s best-selling aircraft.

Meta, the parent company of Facebook, has come under scrutiny from European Union regulators. On Monday, it was accused of not adhering to the EU’s stringent antitrust regulations concerning its new ad-supported social networking service. This accusation marks a significant challenge for Meta, as it navigates the complex regulatory environment of the EU. The bloc’s antitrust rules are designed to ensure fair competition and prevent any single company from dominating the market to the detriment of consumers and competitors. Meta’s alleged non-compliance could have serious implications, including the possibility of hefty fines and mandatory changes to its business practices. The situation underscores the increasing tension between large tech companies and regulatory bodies, as governments seek to rein in the influence of these digital giants.

As the premarket bulls try to shake off Friday’s whipsaw to kick-off this holiday shortened week, we should expect volume to decline with the early close on Wednesday.  However, expect bursts of price volatility with a Powell speech, FOMC minutes and of course the Friday employment situation report.

Trade Wisely,

Doug

Data Anticipation

Data Anticipation

Thursday’s trading session began on a subdued note as stock futures as the market’s reacted earnings reports and market-moving data anticipation. Today investors face a busy morning of earnings and economic reports. Traders are poised to assess the latest data on weekly jobless claims, durable goods orders, pending home sales figures and the latest reading on GDP.

European markets exhibited a cautious stance on Thursday. The pan-European Stoxx 600 index saw a modest decline, edging down by 0.2% as of 11:15 a.m. London time. Media stocks managed to buck the trend, gaining 0.44%, which could suggest a shift in investor focus towards more defensive sectors. On the other hand, the retail sector faced a significant pullback, dropping 1.78%, possibly due to the impact of inflationary pressures on consumer spending and sentiment.

In a significant shift in the currency market, the Japanese yen experienced a substantial depreciation, reaching a nearly 38-year low. Late Wednesday, it plummeted to 160.82 against the U.S. dollar, marking a notable milestone as reported by FactSet. Despite the yen’s weakening, Japan’s domestic economic indicators painted a more robust picture. Retail sales in May outperformed expectations, registering a 3% year-on-year growth, surpassing the anticipated 2% forecasted by a Reuters poll of economists. Meanwhile, China’s economic landscape also showed signs of strength, with industrial profits witnessing a 3.4% increase from January to May.

Economic Calendar

Earnings Calendar

Notable reports for Tuesday before the bell include AYI, APOG, LNN, MCK, SMPL, & WBA.  After the bell include NKE, & ACCD.

News & Technicals’

Micron Technology, a leading chipmaker, experienced a surprising 7% drop in its share value on Wednesday, despite reporting quarterly results that surpassed expectations. This decline occurred even though the company’s revenue guidance met analysts’ estimates, suggesting that other factors may be influencing investor behavior. Over the past year, Micron’s stock has seen a remarkable surge, more than doubling in value, largely attributed to the burgeoning demand for chips in the artificial intelligence sector. This sector’s rapid growth has been a significant driver for the semiconductor industry, with Micron being one of the beneficiaries of this trend. However, the recent dip in share price indicates that even companies at the forefront of technological advancements are not immune to market volatility.

Levi Strauss, the iconic denim brand, encountered a slight setback as it narrowly missed Wall Street’s sales expectations, despite denim’s growing popularity. The company’s Chief Financial Officer expressed concerns, noting that consumers are exercising caution with their spending, particularly regarding discretionary items. This cautious consumer behavior could reflect broader economic trends or a shift in spending priorities. In response to the evolving retail landscape, Levi Strauss has been strategically reducing its dependence on department stores. The brand is expanding its direct-to-consumer channels, including enhancing its own website and brick-and-mortar stores. While this move aims to establish a more direct relationship with customers, it also presents its own set of challenges, such as increased competition in the digital space and the need for strong online user experience.

Wall Street is poised with anticipation for the release of May’s personal consumption expenditures (PCE) price index on Friday, a key indicator of inflation. Investors are hopeful that the report will reveal a softening of inflationary pressures, which could reinforce the possibility of the Federal Reserve reducing interest rates later in the year. Amidst this backdrop, there is an ongoing debate among investors regarding the sustainability of the artificial intelligence (AI) sector’s influence on market performance. As the year progresses, questions arise about whether the AI-driven market rally can maintain its momentum or if a broader range of sectors will need to contribute to market growth. According to strategists surveyed by CNBC Pro, there is a tempered expectation that the S&P 500 will conclude the year with a marginal increase, potentially less than 1% above the current levels. This forecast reflects a cautious outlook on the market’s trajectory in the face of various economic uncertainties.

As we wait with massive data anticipation, remember it doesn’t really matter what the data is, it’s the market reaction that matters.  Unfortunately, being unable to see the future we must be prepared for the possibility of big point gaps and whipsaws as the market tries to price in the new information.  Keep in mind we’re facing the Core PCE number Friday morning so plan for the price volatility and uncertainty to continue.

Trade Wisely,

Doug

Tech Giants Reverse

Tech Giants Reverse

The stock market displays some optimism on Wednesday morning, with futures pointing upwards, after the tech giants reverse and the AI hype returns. Investors and analysts alike are now turning their gaze towards the upcoming release of May’s personal consumption expenditures price index on Friday, a key indicator of inflationary trends. Additionally, the traders anticipate earnings from General Mills and Paychex, scheduled for Wednesday morning, while Micron Technology is set to report its earnings later in the day. These events are poised to provide further insights into the economic landscape and potentially influence market trajectories.

European markets experienced a rebound on Wednesday, with stocks climbing and shaking off the pessimism from the previous session’s downturn. However, economic indicators suggest caution; German consumer sentiment is projected to decline in July, halting a four-month streak of gains. Concurrently, French consumer confidence dipped to 89 in June, as reported by the country’s national statistics office.

Australia was lower on the day as the headline inflation rate increased, reaching 4%, a notable rise from April’s 3.6%. However, industry giants like Taiwan Semiconductor Manufacturing Company, SK Hynix, and MediaTek also saw their shares climb by 1.38%, 4%, and 3.25% respectively. These gains underscore the robust demand for semiconductor technology, which is a critical component in a wide array of consumer and industrial products, amidst a challenging inflationary environment.

Economic Calendar

Earnings Calendar

Notable reports for Wednesday before the bell include GIS, PAYX & UNF.  After the bell include MU, AVAV, CNXC, FUL, LEVI, MLKN, & WD.

News & Technicals’

FedEx’s stock experienced a remarkable surge, climbing over 15% after the market closed on Tuesday, following the announcement of their fiscal fourth-quarter results. The company not only exceeded analysts’ expectations in terms of earnings and revenue but also highlighted its ongoing $4 billion cost-cutting initiative, which includes merging its air and ground operations. This strategic move is aimed at streamlining processes and improving efficiency. The positive financial report, coupled with a reduction in capital expenditure, reflects FedEx’s commitment to optimizing its business model and strengthening its market position amidst challenging economic conditions. The after-hours leap in share price is a testament to investor confidence in FedEx’s restructuring efforts and future prospects.

Volkswagen’s strategic move to invest up to $5 billion in the electric vehicle startup Rivian marks a significant shift in the automotive industry’s transition towards sustainable transportation. The initial commitment of $1 billion underscores the confidence Volkswagen has in Rivian’s potential to disrupt the market. The subsequent investment of $4 billion, contingent upon the successful formation of a joint venture, reflects a long-term vision for collaboration and innovation. However, despite this substantial financial backing, Rivian’s stock performance has been underwhelming, with a decline of approximately 49% in 2024. This juxtaposition of robust corporate support against market skepticism highlights the volatile nature of the EV sector and the challenges that new entrants like Rivian face in a rapidly evolving market landscape.

Ooredoo’s recent partnership with Nvidia represents a landmark development for technology in the Middle East. This collaboration, Nvidia’s first significant foray into the region, involves the deployment of thousands of Nvidia’s GPUs across 26 data centers spanning Qatar and five other countries: Kuwait, Oman, Algeria, Tunisia, and the Maldives. While the financial details remain undisclosed, the strategic implications are clear. These powerful GPUs will be instrumental in processing vast quantities of data, fueling AI chatbots and various tools that are crucial to the AI infrastructure of these nations. This move not only enhances Ooredoo’s data capabilities but also signifies the growing importance of AI technology in global telecommunications and the pivotal role of the Middle East in the tech industry’s future.

The QQQ celebrated on Tuesday as the tech giants reverse lead by the AI darling NVDA.  Unfortunately, the DIA and IWM also reversed as the rush back into tech reversed taking way the nice gains of Monday.  I suspect the price volatility will continue as the market focus will soon turn to the looming market-moving data coming Thursday and Friday.  Plan your risk accordingly.

Trade Wisely,

Doug

NVDA Selloff

NVDA Selloff

On Tuesday, stock futures suggested a mixed open, after a sharp NVDA selloff that blead over to other technology stocks.  The result was the most substantial single-day decline of the Nasdaq Composite’s since April. However, shares of Nvidia rebounded, climbing over 3% in overnight price action. This uptick comes on the heels of a previous session where Nvidia’s stock tumbled more than 6%, marking its sharpest drop since April 19, when it plummeted by 10%. The broader semiconductor sector also felt the heat, with companies like Super Micro Computer, Qualcomm, and Broadcom experiencing downward pressure on their stock prices.

European markets faced a downturn on Tuesday, mirroring the negative shift in U.S. market sentiment that marked the beginning of the week. The pan-European Stoxx 600 index, a key benchmark for regional equity performance, was particularly impacted during morning trading hours. The decline was led by the tech and industrial sectors, which saw significant selloffs

In the recent trading session, Japan’s Topix index surged, hitting its highest point in three weeks. Meanwhile, South Korea’s Kosdaq, primarily composed of small-cap stocks, rebounded, ending a three-day losing streak. Contrasting these gains, Mainland China’s CSI 300 experienced a decline, dropping by 0.54% to 3,457.90, marking its lowest level in four months. This downturn for the CSI 300 represents its weakest close since February 28. Despite this, the broader Asia-Pacific markets exhibited an upward trend.

Economic Calendar

Earnings Calendar

Notable reports for Tuesday before the bell include SNX.  After the bell include FDX, PRGS, & WOR.

News & Technicals’

The European Commission, serving as the executive arm of the EU, has issued a preliminary statement indicating that Microsoft may have violated EU antitrust regulations. The concern arises from Microsoft’s practice of integrating its communication and collaboration tool, Teams, with its widely used business productivity suites, Office 365 and Microsoft 365. This integration is seen as potentially restricting competition by not providing consumers with a choice to opt out of Teams when purchasing the software packages. The investigation, which began in July 2023 following a complaint by Slack Technologies, suggests that Microsoft’s bundling of Teams might have unfairly given it a “distribution advantage” over other similar applications. Although Microsoft has begun offering some software bundles without Teams, the European Commission believes these measures are insufficient to fully restore competitive conditions. Microsoft has expressed its willingness to work with the Commission to address these concerns and find solutions that satisfy the regulatory body’s requirements for fair competition.

Airbus, the European aerospace corporation, experienced a notable 9% drop in its share price on Tuesday following an announcement that it would be revising its financial targets downward for the year 2024. The company has adjusted its expectations to forecast lower earnings before interest and taxes (EBIT) and a reduction in the number of commercial aircraft deliveries. Initially, Airbus had set a target of delivering around 800 aircraft; however, this number has now been scaled back to approximately 770. The revision of these targets is attributed to persistent supply chain challenges and unforeseen expenses in the space systems division, which have imposed additional costs amounting to roughly 900 million euros. These issues have compelled Airbus to delay its timeline for increasing the production of its A320 aircraft, further impacting its operational and financial projections for the year. The company’s half-year results, which are keenly anticipated, will be disclosed on July 30, providing further insights into the impact of these adjustments.

According to a recent report by Reuters, the Biden administration is investigating three Chinese telecommunications giants—China Mobile, China Telecom, and China Unicom. The probe is centered on concerns that these state-backed firms could potentially exploit their cloud and internet operations within the United States to allow Beijing access to sensitive American data. The Commerce Department is spearheading the investigation, which has involved subpoenas and risk-based analyses of China Mobile and China Telecom. Despite the companies’ limited presence in the U.S., primarily in cloud services and routing wholesale internet traffic, there is a fear that they could still access Americans’ data. This is significant because telecom regulators have previously barred these firms from providing telephone and retail internet services in the country.

The tech sector is hoping to rebound today after the sharp NVDA selloff worried tech investors spreading the selling other stocks in the sector.  With the GDP and Core PCE on the horizon keep an eye on the Consumer Confidence number which could provide some price volatility.   

Trade Wisely,

Doug

One Stock That Rules Them All

One Stock That Rules Them All

S&P 500 futures point upwards on Thursday morning as the bulls look to extend the one stock that rules them all, NVDA. In addition to monitoring the stock market’s movements, investors are gearing up to dissect a slew of new economic data slated for release in the latter half of the week. Key among these are the initial jobless claims figures and housing starts data, both due this morning.

European stock markets opened on an optimistic note on Thursday morning, buoyed by a series of key monetary policy announcements. The Swiss National Bank (SNB) contributed to the positive sentiment by reducing its policy rate by 0.25 percentage points to 1.25%, marking a cautious yet significant move in its monetary stance. Meanwhile, Norway’s central bank has opted for stability, maintaining its policy interest rate at 4.5%. All eyes in the United Kingdom are now turned towards the Bank of England’s rate decision, which is due later today.

In a day marked by a general downturn in the Asia-Pacific markets, China stood out by maintaining stability in its monetary policy, holding its one- and five-year loan prime rates steady at 3.45% and 3.95%, respectively. On a brighter note, New Zealand’s economy showed signs of resilience, emerging from a technical recession with a 0.2% growth quarter-on-quarter in the initial three months of the year.

Economic Calendar

Earnings Calendar

Notable reports for Thursday before the bell include ACN, CMC, DRI, GMS, JBL, KR, & WGO. After the bell include SWBI.

News & Technicals’

Amid escalating tensions in the Middle East, Hezbollah has issued a stark warning, indicating a stance of no restraint or “no red lines” should a comprehensive conflict break out between Lebanon and Israel. The militant group’s Secretary General, Sayyed Hassan Nasrallah, has publicly claimed that Hezbollah possesses intelligence suggesting Israel is actively engaging in military exercises within Cyprus as a precursor to war with Lebanon. In response to these allegations, Cyprus’ President Nikos Christodoulides has firmly denied any involvement in such hostilities. On Wednesday, he emphasized Cyprus’ neutral position, asserting that the nation is not a participant in the conflict but rather a contributor to the peace process. This statement from the Cypriot leader seeks to clarify the island nation’s role and dispel any misconceptions about its stance amidst the growing regional unrest.

The Swiss National Bank (SNB) has reduced its key interest rate by 25 basis points, bringing it down to 1.25%. This marks the institution’s second rate cut within the year, aligning with the predictions of two-thirds of the economists surveyed by Reuters. The consensus had been leaning towards this exact quarter-percentage-point reduction. Meanwhile, Switzerland’s inflation rate has stabilized at 1.4% in May, following a transient increase the previous month. The SNB forecasts that this inflation rate will maintain a steady average throughout the entirety of 2024. This proactive approach by the SNB reflects its commitment to balancing economic growth with price stability, amidst a landscape of fluctuating global financial conditions.

The mortgage landscape has seen a slight easing this week, as the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances (up to $766,550) experienced a dip to 6.94% from the previous 7.02%. This marginal decrease comes amidst a broader context where mortgage applications for home purchases have shown a modest uptick of 2% over the week. However, this figure still trails by 12% compared to the same period last year, underscoring a year-over-year slowdown in the housing market. Initially, mortgage rates inched higher at the start of the week, but the trend reversed following Tuesday’s announcement of weaker-than-anticipated retail sales data, which prompted a pullback in rates. This fluctuation reflects the ongoing responsiveness of mortgage rates to economic indicators and market dynamics.

Despite its already extended condition NVDA looks to gap higher as the once stock that rules them all becoming the most valuable company in the world last Tuesday.  Leadership in the market is however extremely thin so watch these tech titans careful as a turn lower could a trigger a painful pullback for those chasing in a fear of missing out.

Trade Wisely,

Doug

Retail Sales Data

Retail Sales Data

S&P 500 futures remained relatively unchanged on Tuesday morning, with investors bracing for the release of May’s retail sales data. Consensus suggests a modest increase of 0.2% from April anticipated by economists surveyed by Dow Jones. The day is also set to bring a suite of economic reports, shedding light on industrial production and business inventories. Adding to the uncertainty is, several Federal Reserve officials, including Boston Fed President Susan Collins and Richmond Fed President Tom Barkin, are slated to deliver speeches at various events nationwide.

European stock markets experienced an uptick in Tuesday’s trading session, shaking off the uncertainty that began the week. Investors’ attention is now focused on the upcoming policy rate decision from the Bank of England, scheduled for Thursday. The consensus among economists suggests that the Bank will maintain the current interest rate at 5.25%. This expectation is bolstered by a Reuters poll, where a majority of economists predict that the Bank of England might opt for a rate cut in August.

Asia-Pacific stock markets experienced a significant rebound on Tuesday, buoyed by a positive overnight performance on Wall Street. The upswing came as investors digested the latest interest rate decision from the Reserve Bank of Australia. In response to the central bank’s move, the Australian S&P/ASX 200 index saw a notable increase of 1.01%. Meanwhile, Japan’s Nikkei 225 index recovered from Monday’s nearly 2% drop, rising by 1%. The broader Topix index also enjoyed gains, albeit more modest, finishing 0.58% higher. In South Korea, the Kospi index ascended by 0.72%.

Economic Calendar

Earnings Calendar

Notable reports for Tuesday before the bell include CRMT, CGNT, & PDCO.  After the bell include KBH.

News & Technicals’

Apple is currently under significant scrutiny by the European Union due to several “very serious” concerns related to the Digital Markets Act (DMA), as stated by the EU’s competition chief, Margrethe Vestager, in a CNBC interview on Tuesday. The DMA represents a comprehensive legislative effort to curb the influence of major technology companies. In March, the European Commission, which is the executive branch of the EU, initiated an investigation into Apple’s practices under this new regulation. This probe is part of a broader initiative to ensure that tech giants operate within a framework that promotes fair competition. Vestager has indicated that the findings of this investigation are expected to be disclosed “hopefully soon,” which could have significant implications for Apple’s operations within the European market.

Fisker, the American electric vehicle (EV) manufacturer, has sought bankruptcy protection, a move announced late Monday. The company has been grappling with a swift depletion of funds, primarily due to the costs associated with rolling out its “Ocean” SUVs in both the United States and Europe. In a strategic pivot aimed at addressing its financial woes, Fisker is now looking to sell its assets and restructure its debt under Chapter 11. The decision comes after a thorough review of potential avenues for the business, with the company stating, “After evaluating all options for our business, we determined that proceeding with a sale of our assets under Chapter 11 is the most viable path forward for the company.” This development marks a significant turn for Fisker, as it seeks to navigate through its current challenges and find a sustainable path forward in the competitive EV market.

The Kremlin has confirmed that President Vladimir Putin is set to embark on a ‘friendly state visit’ to the Democratic People’s Republic of Korea (DPRK), accepting an invitation from North Korea’s leader, Kim Jong Un. This announcement, made on Monday, has sparked considerable attention on social media platform X, where videos and images depict the streets of Pyongyang adorned with Russian flags and portraits of Putin, signaling preparations for his anticipated arrival. The visit is drawing scrutiny from geopolitical analysts, with one commenting that the burgeoning relationship between Moscow and Pyongyang represents “a threat like no other” to Western interests. This visit underscores the deepening ties between the two nations and could have far-reaching implications for international relations and security dynamics.

Boeing’s CEO, Dave Calhoun, is set to confront a Senate panel amid escalating concerns over safety and quality control issues plaguing the aircraft manufacturer. The hearing, convened by the Senate Homeland Security Committee’s Permanent Subcommittee on Investigations, is scheduled to commence at 2 p.m. ET on Tuesday. This comes in the wake of a recent incident where a door plug was ejected from a Boeing 737 Max plane mid-flight, an event that has intensified scrutiny on the company. The nearly new aircraft’s mishap in January has put Boeing squarely in the hot seat, as it grapples with the fallout and faces tough questions from lawmakers about its commitment to safety standards.

After Monday’s surge higher it’s likely the retail sales data will determine if the bulls can follow though for another winning day.  Expect price volatility Fed members pontificate interest rates with speaking engagements around the county today.  Remember the market is closed on Wednesday so plan your trading risk accordingly.

Trade Wisely,

Doug