Mike Dolan talks about the future outlook for the US and global markets
The so-called “Magnificent 7” of U.S. megacap tech stocks slump as first-quarter results begin this week, while AI chipster Nvidia plunges 10% on Friday after a nervous week for the sector. did.
On Monday, as a tense weekend in the Middle East passed without any new direct missile exchanges between Israel and Iran, even though there were already ample signs of a cooling of the situation on Friday. World markets stabilized more broadly.
Still, the easing of “safe trading” after the weekend sent U.S. oil prices back to their lowest levels this month, and gold prices fell 1%.
But with four of the Magnificent Seven companies scheduled to report company updates this week – Tesla, Meta, Microsoft and Alphabet – the alarming backlash from the big tech companies is now top of mind. ing.
Artificial intelligence pioneer Nvidia's 10% drop on Friday was perhaps the most eye-catching move in what has been a pretty rough week for the sector. The semiconductor giant's stock is still up more than 50% year-to-date, but is now down 22% from last month's high and its lowest since February.
It's not clear what triggered the selloff, but some analysts believe the 23% decline in supermicrocomputers, a small-cap stock, was due to a lack of guidance on upcoming earnings reports. It is pointed out that this is a factor.
But before that, it was a bad week for tech and semiconductor stocks. Nasdaq futures rose about 0.5% before Monday's bell, but the index fell more than 5% last week, marking its worst week since 2022.
Taiwan's TSMC's sharp pullback after its earnings report earlier in the week has begun to ripple, with Netflix dropping nearly 10% on Friday after the video streaming company's second-quarter earnings outlook fell short of analysts' expectations. The sharp decline was a further blow.
The once dominant NYFANG index fell a whopping 8.3% last week. Analysts at UBS on Monday downgraded what they call the “Big 6 Tech+” stocks, or the Magnificent 7 minus Tesla, from overweight to neutral.
And elsewhere in the Magnificent 7, Apple's 2024 loss is now more than 14%, while Tesla's abysmal decline of more than 40% this year shows no signs of letting up.
With demand for electric vehicles plummeting around the world, serious price competition with Chinese competitors, corporate governance issues with CEO Elon Musk's compensation, and the associated Tesla's troubles are numerous, even down to defects.
But it's clear that the Federal Reserve's “prolonged high” view of interest rates isn't helping the sector's overinflated valuations. Looking at past earnings seasons, we can see that there are very high hurdles for companies to surprise the market gallery at this stage.
Elsewhere in the macro world, U.S. Treasuries and the dollar are in contrast with the development of the Fed's stubborn view, strong economic data coming out, and the potential for European interest rates to fall first. In light of the current situation, we continue to make a profit.
Two-year Treasury yields rose above 5% again on Monday, with a two-year bond auction scheduled for Tuesday.
With the Bank of Japan meeting scheduled for later this week, the dollar continues to rise against the Japanese yen at just under 155 yen to the dollar, a fraction of last week's high.
However, the European Central Bank has made it clear that it plans to lower its key policy interest rate as early as June, and the dollar continues to appreciate against the euro.
Speculative long dollar positions increased further in the week ending April 16, reaching $28.51 billion, the largest position since June 2019, according to the latest data from the CFTC.
The big mover on Monday was in the pound, with Bank of England Deputy Governor David Lumsden's surprisingly dovish speech on Friday announcing that the Bank of England expected inflation to fall to 2% this quarter and below that for the next few quarters. The stock fell to a five-month low after the company signaled that it expects it to remain at that level. For years.
Most other global stock exchanges were also firm as U.S. stock futures rose.
Hong Kong stocks rose more than 1.5% on Friday, even as mainland stocks fell, as investors took comfort in China's securities regulator's decision to promote Hong Kong's status as an international financial center.
The China Securities Regulatory Commission announced that China will facilitate Hong Kong listings by major Chinese companies and expand the Stock Connect cross-border investment scheme.
China kept its benchmark lending rate unchanged at the monthly fixed rate on Monday, in line with market expectations.
European bank earnings will be in the spotlight on stock markets this week, with BNP Paribas, Deutsche Bank, Barclays and Lloyds all reporting at the same time.
Among the stocks gaining on Monday, Galp Energia soared 17% after the Portuguese company said its Mopane field off the coast of Namibia could contain at least 10 billion barrels of oil.
Here are the key diary items that could give direction to US markets later on Monday:
* U.S. Corporate Revenue: Verizon, Ameriprise Financial, Truist Financial, Globe Life, Nucor, Cadence Design, Alexandria Real Estate, Brown & Brown, Packaging Corp of America
* Chicago Fed March Economic Survey.Eurozone April Consumer Confidence Survey
*The U.S. Treasury sells 3-month and 6-month bills.
(Edited by Bernadette Baum)
