To The Moon

End of 1st Week of third quarter - 05 July 2024 have seen strong gains in mega-cap stocks. This has helped the S&P 500 and NASDAQ to reach all-time highs on Friday with +0.5% and +0.9% respectively.

But we are still seeing negative bias continue to surface following the June Employment Situation Report.

June Employment Situation Report Align With Market Rate Cut Expectation

The June Employment Situation Report aligned with what the market expect for a rate cut but concerns have been seen raised regarding lower earnings growth if weakening labor market leads to reduced consumer spending.

Here are the Key Employment released, the Private sector payrolls increased by 136,000 while the average hourly earnings growth slowed to 3.9% YoY from 4.1%

Unemployment rate was seen to have rose from 4.0% to 4.1%, while the long-term unemployment (measure 27 weeks or more) rose in May from 20.7% to 22.2%.

Other labor data which saw :

June Nonfarm Payrolls came in at 206K with consensus at185K while the previous was revised to 218K from 272K. June Nonfarm Private Payrolls came in at 136K with consensus at 160K) while the previous was revised to 193K from 229K

June Average Hourly Earnings was 0.3% with consensus at 0.3% while the previous was 0.4%. June Unemployment Rate was 4.1% with consensus at 4.0% while we saw previous at 4.0%. June Average Workweek came in at 34.3 with consensus at 34.3 while the previous is same as consensus at 34.3.

The key takeaway is that softening labor market conditions may provide the Fed with justification to cut rates in September.

One important economic data to look out on Monday (08 July) would be the May Consumer Credit report with consensus at $9.5 billion and the previous figure was at $6.4 billion. This report is expected to come in at 15:00 Eastern Time.

Treasury Yields Fell In Response To Latest Jobs Report

The jobs report created a response from the treasury yield which reflected the increased expectations of rate cut. The 10-year note yield decreased by eight basis points to 4.286%, and the 2-year note yield dropped 12 basis points to 4.612%.

Possible 24-basis Point Cut At September FOMC Meeting

Rate cut expectations increased, with the probability of a 25-basis point cut at the September FOMC meeting rising to 72.2%% on 05 Jul from 57.9% a week ago, according to the CME FedWatch Tool.

At time of this writing, we are seeing a small dip to 72.0% for the probabilities.

Amazon and Tesla Help S&P Consumer Discretionary Closed Slightly Higher

In the S&P 500 Consumer Discretionary Sector which closed slightly higher at +0.85%, while we saw many stocks particularly those with high exposure to discretionary spending. Homebuilders, entertainment stocks, and cruise lines suffered declines.

S&P 500 Consumer Discretionary Sector gain was helped by gains in Amazon.com (AMZN, +1.2%) and Tesla (TSLA, +2.1%). The underperformance of some discretionary stocks highlighted concerns about lower earnings growth prospects.

S&P 500 Communication Services sector provide the best performance at 2.74% with contribution from $Alphabet(GOOGL)$ gaining +2.57% and $Meta Platforms, Inc.(META)$ gaining +5.87%.

Stocks To Watch

New Street Research has downgraded $NVIDIA Corp(NVDA)$ to Neutral from Buy as they indicated that the stock is fully valued at its current price, with upside potential only in a bull case scenario that extends beyond 2025.

Their analysts has a price target over 12-month period of $135 and they emphasize that buying is recommended on prolonger weakness while NVDA’s franchise quality remains intact.

If we looked at the NVDA from the technical perspective, we might notice that MACD does suggest that there is some selling off or profit taking potential for NVDA, but the forming of the KDJ tells a different story, we are seeing a BUY signal on 02 Jul 2024, amd after that we saw NVDA going above $125.

And we can see that NVDA J value from KDJ is still on the upside move, unless there is some heavy sell-off, I believe NVDA should be able to move higher.

Billionaire investor Mario Gabelli (Trades) stated that he may not sell his shares in $Paramount Global(PARA)$ even if it merges with Skydance. Gabelli, a key voting shareholder in Paramount's holding company, mentioned that he needs to see the structure of the transaction before making any decisions.

The new terms appear favorable for minority shareholders, and National Amusements, which owns 77% of Paramount's Class A stock, is not mandating the merger's approval by a majority of non-Redstone shareholders.

For Paramount, I have been monitoring this stock after the news of merger with Skydance, because from the technical, we are seeing potential of it trying to reach its recent high of $12.65.

From the MACD crossover (bullish) that happen on 26 June 2024, there have been some nice move upside except the recent dip on last Friday (05 Jul), KDJ J value is trending upwards and MACD is making an upward trend. I believe there is some potential in this stock.

$Advanced Micro Devices(AMD)$ surged nearly 5% as semiconductor stocks rallied. AMD has added more than 10% over the past five trading sessions, driven by expanding data center revenue. Intel (INTC) also saw a 2% increase despite a year-to-date decline of nearly 40%. Analysts believe Intel's stock is underrated and that the recent sell-off was due to softer-than-expected guidance for the remainder of 2024.

If you have read my previous article before on How AMD Could Benefit From "Hyperscalers Want Choice", AMD have been playing the alternative choices for hyperscalers (e.g. data centre providers.

So it does not come as a surprise that AMD surged nearly 5% as semiconductors stocks rallied. From the technicals, after the buy signal appear for MACD and KDJ on 26 June 2024, AMD has been trading rather volatile but now we are seeing a nice upside move as KDJ and MACD has finally show some clear signal for more upside movement.

Several Chinese EV stocks, including XPeng (XPEV), Li Auto (LI), and NIO (NIO), traded defensively after the European Union imposed steep tariffs on all battery electric vehicles imported from China. The EU found that Chinese manufacturers benefited from uncompetitive subsidies, which significantly increased their market share in Europe.

Summary

While we continue to see the mega cap stocks providing strong gains pushing the indices to new highs, we need to also prepare our strategy with some potential stocks, like AMD, PARA and NVDA,

The semiconductors stocks should be able to perform as data centre demand continue to increase and this should help to increase the revenue of these chip providers.

Appreciate if you could share your thoughts in the comment section whether you think mega cap stocks rally can continue in the week of 08 July 2024.

@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.