Weekly: A ‘triple-witching’ day is around the corner, investors are wondering the tech rally
Last Week's Recap
The US Market - The Nasdaq eked out a fifth straight record closing high
The tech-heavy Nasdaq eked out a fifth straight record closing high on Friday, while the S&P 500 and the Dow ended the day lower.
Hopes for a continued cooling of inflation have boosted the S&P 500 and Nasdaq this week. The S&P 500 and Nasdaq Composite ended the week higher by about 1.58% and 3.24%, respectively.
The new economy projections show just one 25bp rate cut this year, down from three in March. Economists forecast two rate cuts. Despite the hawkish Fed shift, markets raised the odds of a September rate cut as well as the chances of two cuts in 2024.
The CPI and PPI inflation reports came in below expectations. The overall CPI was unchanged from April, amid lower energy prices. The core CPI rose to just 0.16%, the smallest increase since August 2021. The PPI fell 0.2% on the month, while the core PPI was flat, both well below expectations.
The US Sectors & Stocks - "MAN" reached new highs
Information technology stocks led S&P 500 to winning week.Yet, only three of the 11 sectors finished the week in the green.
The technology sector outperformed with a rally of more than 5%. Broadcom (AVGO) led the index higher with a rally of more than 23%, followed by Skyworks’(SWKS) climb of more than 15%. Broadcom (AVGO) beat fiscal Q2 views and raised full-year sales guidance. Demand for custom AI chips and VMware software led the way. The chipmaker and infrastructure software provider also announced a 10-for-1 stock split.
Real estate and communication services were the other two sectors registered the week up, with less than 1% in gains, meaning they underperformed the index as a whole.
On the other end of the spectrum, the financial and energy sectors were the two worst performing of the 11 this week. Both closed the week down around 2%.
The three largest market caps named "MAN"- Microsoft (MSFT)、Apple (AAPL) and Nvidia (NVDA), were all reached record highs during the week. Nvidia stock (NVDA) closed up 9% in its first week following the split.
Apple (AAPL) surged nearly 8% last week as it revealed Apple Intelligence. The consumer electronics maker will use its own AI models as well as third-party models, starting with OpenAI's ChatGPT.
Oracle (ORCL) broke out with a 10% gain as its AI deals. Results for the May quarter actually came in lighter than expected. But the earnings and sales miss was overshadowed by a bullish outlook from the database software company. Oracle announced a deal to provide cloud capacity for OpenAI to train its large language models, expanding an existing cloud partnership with Microsoft. CEO said Oracle expects double-digit sales growth for fiscal 2025.
Adobe (ADBE) soared 13% after posting better-than-expected earnings and revenue. The digital media and marketing software firm cited strong growth across its Creative Cloud, Document Cloud and Experience Cloud. Adobe also lifted its full-year guidance.
Tesla (TSLA) announced during its annual meeting that shareholders voted in favor of reinstating CEO Elon Musk's 2018 $56 billion pay package as well as reincorporating the EV giant in Texas, moving it from Delaware.
General Motors (GM) hit a two-year highs. It announced a $6 billion buyback. GM now expects to make 200,000-250,000 electric vehicles in 2024, showing growth from 2023 but down 10% at the midpoint from a previous target of 200,000-300,000.
Hong Kong Market - HSI lost 2.3%
Hong Kong stocks were weak, with the benchmark posting a weekly loss of 2.3%, as investors turned cautious before the release of China’s key economic numbers for May.
New bank lending in China rebounded far less than expected in May and some key money gauges hit record lows. Investors are gearing up for a data-packed Monday, when China’s statistics bureau is due to announce industrial production, retail sales and fixed-asset investment numbers.
“There might be some back and forth in the path to the economic recovery,” said Yao Liqi, an analyst at Shenwan Hongyuan Group. “Investors are now waiting for the efficacy of the policy support, particularly that of the rescue measures for the property market.”
Meituan (3690.HK) planned to buy back class B ordinary shares worth up to $2 billion, according to a Tuesday filing with the Hong Kong Exchange.The shares will be repurchased in the open market, the filing stated.
The European Union provisionally will impose additional tariffs of up to 38.1% on Chinese EVs starting in July. That's on top of the current 10% duties. The tariffs will hit Chinese EV makers such as BYD (1211.HK), Nio (9866.HK) and XPeng (9868.HK). Notably, the new tariffs appear to exclude plug-in hybrids.
Singapore Market - STI was down 0.8%
The Singapore market was a lacklustre week. The benchmark Straits Times Index (STI) was down 0.8% to 3,297.55 during the week. The local market will be closed for Hari Raya Haji on Monday, June 17, 2024.
Singapore Airlines has offered payment of $25,000 to passengers who sustained serious injuries during a flight that hit extreme turbulence last month.
The chief executive officers of 13 Straits Times Index (STI) component companies received higher salaries in FY2023 than they did in FY2022 – about half of the blue-chip index’s 27 constituents that disclosed salary information for their top executives for the period.
Australian Market - ASX lost 1.7%
The Australian share market once again ignored a rally on Wall Street to a fresh record high and ASX 200 closed down 1.7% for the week.
Banks and miners were mainly lower, and falling commodity prices caused mining stocks to wilt. It was yet another reminder of how the Australian bourse with its heavy concentration of miners and banks has disconnected from the Artificial Intelligence rally that is consuming Wall Street.
Shares in gambling giant Tabcorp (ASX: TAH) also had a good day, up 10.1% to 66c after it asked the NSW Government to change wagering laws in a move that could lead to increases in the amount of tax paid by rivals such as Sportsbet and Entain.
The Week Ahead
Macro Factors - A quiet week ahead will greet investors
It will be a holiday-shortened week for investors, with a handful of earnings reports, economic data updates, and monetary policy decisions abroad. U.S. market will be closed for Juneteenth on Wednesday, June 19, 2024.
A key reading on how consumers are holding up amid higher rates is expected on Tuesday with the monthly retail sales report for May. Economists expect that retail sales increased 0.3% from the prior month, which would mark a rebound in spending after sales unexpectedly came in flat in April.
Investors are wondering whether the tech rally that’s pushed the S&P 500 through record after record this year can continue, even as some cracks emerge in the market outlook. Markets are increasingly bifurcated lately.
Friday is a ‘triple-witching’ day for U.S.market. That's the quarterly event when derivatives contracts tied to index options, index futures and single-stock options expire on the same day. The flurry of contracts expiring at the same time can lead to heightened volatility in the markets.
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