A look at the day ahead in the US and global markets by Mike Dolan
The so-called “Magnificent 7” of mega-cap US tech stocks fell sharply as first-quarter earnings updates kick off this week, with AI chip star Nvidia fading 10% on Friday after a nervous week for the area.
Global markets broadly stabilized on Monday as another tense weekend in the Middle East passed without another direct missile exchange between Israel and Iran – although a cooling of the situation had already been reported on Friday .
However, the conclusion of the ‘security operations’ after the weekend saw US crude prices fall back to their lowest levels this month and gold prices fell 1%.
But with four of the Magnificent 7 due to release updates this week – Tesla, Meta, Microsoft and Alphabet – the tech giants’ alarming pushback is now a priority.
Nvidia’s 10% AI drop on Friday is perhaps the most striking move in a fairly gloomy week for the sector. Although shares of the chip giant are still up more than 50% year to date, they have now fallen 22% from last month’s highs to their lowest level since February.
It’s unclear what triggered the rout, although some analysts pointed to a 23% drop in a smaller, related stock, Super Micro Computer, as a factor due to lack of guidance on its upcoming earnings report. results.
But before that, it had been a bad week for tech and chip stocks. Although Nasdaq futures rallied about 0.5% before the bell on Monday, the index last week recorded its worst week since 2022 with a decline of more than 5%.
A sharp decline in Taiwan’s TSMC after its earnings update earlier in the week got the ball rolling, then a nearly 10% drop in Netflix on Friday was another blow after the company’s revenue forecast video streaming company’s second quarter failed to meet analysts’ expectations.
The once-dominant NYFANG index lost 8.3% last week. UBS analysts on Monday downgraded the rating of what they call “Big 6 Tech+” stocks – essentially the Magnificent 7 minus Tesla – from overweight to neutral.
And elsewhere in the Magnificent 7 of 2024, losses at Apple now stand at more than 14% – while Tesla’s precipitous fall of more than 40% this year shows no signs of slowing.
Tesla’s woes are legion: from the sharp drop in global demand for electric vehicles to a real price war with its Chinese competitors, including corporate governance problems with the payment of boss Elon Musk and numerous problems of products to get started.
But the prospect of the Federal Reserve keeping interest rates as “higher for the long term” clearly doesn’t help strained valuations in the sector – where earnings season so far shows that there is an extremely high bar to wow the market at this point.
Elsewhere in the macro world, US Treasuries and the dollar continue to chomp in the face of the Fed’s stubborn outlook, strong economic numbers coming in and a mixed picture in Europe that means interest rates seem ready to go down first.
Two-year U.S. Treasury yields rose above 5% again on Monday, with a two-year auction scheduled for Tuesday.
The dollar continues to advance at a fraction of last week’s highs against the Japanese yen, just below 155 per dollar, with the Bank of Japan meeting later this week.
But as the European Central Bank has clearly announced its intention to reduce its key rates from June, the dollar also remains inflated against the euro.
According to the latest CFTC data, speculative long dollar positions expanded further in the week ending April 16, reaching $28.51 billion – the largest position since June 2019.
The big mover on Monday was the pound sterling, which fell to a 5-month low after a surprisingly dovish speech on Friday from Bank of England deputy governor David Ramsden signaled that the BoE was expected inflation to fall to 2% this quarter and stay there for the next two months. of years.
With U.S. stock futures rising, most other global stock markets also firmed.
Hong Kong stocks climbed more than 1.5% even as mainland stocks fell, with investors finding comfort in Friday’s decision by China’s securities regulator to promote the city’s status as a global financial center.
China will facilitate Hong Kong listings of major Chinese companies and expand the Stock Connect cross-border investment program, the China Securities Regulatory Commission said.
China left its key rates unchanged in a monthly fix on Monday, in line with market expectations.
The results of European banks will be in the stock market spotlight this week, as reported by BNP Paribas, Deutsche Bank, Barclays and Lloyds.
Among the hottest stocks on Monday, Galp Energia jumped 17% after the Portuguese company said the Mopane field off Namibia could hold at least 10 billion barrels of oil.
Key agenda items that could provide direction for US markets later on Monday:
* Profits of US companies: Verizon, Ameriprise Financial, Truist Financial, Globe Life, Nucor, Cadence Design, Alexandria Real Estate, Brown & Brown, Packaging Corp of America
*Chicago…
