To The Moon

Yesterday (30 May) we saw an underlying positive bias, but that did not help the major indices as indices closed with solid losses.

The market-cap weighted S&P 500 fell 0.6% while the equal-weighted S&P 500 closed 0.5% higher. We saw selling picked up in some of the heavyweight stocks in the last half hour of the session. This drive the huge decline in the afternoon session which have the major indices closed near their lows of the day.

CME Group index pricing For DJIA and S&P 500 Froze Briefly

We noticed that the CME Group index pricing for the Dow Jones Industrial Average and S&P 500 briefly froze around 10:41 Eastern Time, but began updating as usual around 12:00 Eastern Time.

Significant Stock Movements - Declines Seen

Nvidia (NVDA) stock price dropped by 3.8% following a Bloomberg report that US will be slowing down the issuance of the Middle East licenses for AI chip makers. This will affect Nvidia plan for expansion into the Middle East.

Other tech stocks also suffered declined, Microsoft (MSFT) went down by 3.4%, Alphabet (GOOGL) declined by 2.2%, Meta Platforms (META) declined by 1.5%.

Salesforce (CRM) suffered a heavy 20% decline after their disappointing guidance in its latest earnings release.

S&P 500 Sector Affected By Big Tech Names Decline

The big tech names losses affected their respective S&P 500 sectors to end with solid declines, The S&P 500 information technology sector went down by 2.45%. The communication services sector recorded a 1.1% loss.

Sectors that close higher with more than 1.0% were the rate-sensitive real estate (+1.5%) and utilities (+1.4%) sectors, benefitting from a drop in market rates. The remaining nine sectors closed with gains ranging from 0.1% to 1.5%.

Treasuries Price Action and Market Rates Movement

One of the factor contributed to the underlying upside bias in equities is movement in the market rates. This came along with market anticipate hope before the PCE Price Indexes today (Friday, 31 May 2024). PCE Price Index is Fed’s preferred gauge on inflation.

Here are the economic data released on Thursday (30 May), we saw a downward revision to Q1 GDP, a widening in goods deficit in April was reported.

One significant note is the ugly 7.7% decline in pending home sales in April. Initial jobless claims number came in pretty decent with a rise of 3,000 to 219,000 in the week ending 25 May.

This led to the price action of the treasury note, with the 2-yr note yield fell two basis points to 4.931%.

The 10-yr note yield declined nine basis points to 4.547%.

Retailers Provide Mixed Earnings

We have the retailers providing mixed earnings, with Best Best Buy (BBY) rose by 13.4% and Foot Locker (FL) gained by 15.0%.

But Kohl's (KSS) and Dollar General (DG) slid 22.9% and 8.1% respectively. This has caused the $SPDR S&P Retail ETF(XRT)$ to suffer a decline, even though the result is mixed.

Stocks To Watch

With the indices closed with losses despite positive bias, we will need to watch some of the big tech names today (31 May 2024) as we closed May trading session.

$NVIDIA Corp(NVDA)$ and $Advanced Micro Devices(AMD)$ faced pressure after U.S. officials slowed licenses for sending large-scale AI accelerators to the Middle East. Nvidia's shares fell 2.8%, while AMD saw a 1% rise, reflecting concerns over national security reviews and the potential impact on their business operations.

$Microsoft(MSFT)$ faced scrutiny from lawmakers over cybersecurity concerns, with senators expressing serious concern about the Pentagon's potential upgrade to Microsoft's E5 license. This issue contributed to a 2.4% drop in Microsoft shares during midday trading.

$Costco(COST)$ reported a Q3 GAAP EPS of $3.78, beating estimates by $0.10, and revenue of $58.52 billion, which surpassed expectations by $520 million. Despite positive sales growth and a strong performance in e-commerce, shares dipped slightly by 1.09% in post-market trading.

$Zscaler Inc.(ZS)$ posted a Q3 Non-GAAP EPS of $0.88, surpassing estimates by $0.23, and revenue of $553.2 million, beating expectations by $17.11 million. The company provided an optimistic Q4 and 2024 outlook, which was well-received by investors.

Zscaler rose 16% after its earnings report, and from the chart below, we are not seeing any BUY signal since its last March earnings, and even with a 16% surge to around $180.

Zscaler looks like a potential BUY, as there is potential of going above $200, with a possible $280.

Summary

I think despite the poor performance from major tech names, there are still opportunities from some of the cybersecurity stocks which has reported earnings, Also not forgetting AI stock like C3.ai

I would still trade cautiously as we are still within the consolidation and correction period. But monitor price action for some potential opportunities.

Appreciate if you could share your thoughts in the comment section whether you think market would recover slightly today (31 May) with more positive bias?

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.