Despite facing a challenging week, the S&P 500 and Nasdaq Composite have rebounded strongly, driven by a resurgence in tech stocks. The S&P 500 notched its best day since early June, while the Nasdaq Composite advanced to finish at 18,007.57. This tech-driven rally comes on the heels of the worst weekly loss for the S&P
Despite facing a challenging week, the S&P 500 and Nasdaq Composite have rebounded strongly, driven by a resurgence in tech stocks. The S&P 500 notched its best day since early June, while the Nasdaq Composite advanced to finish at 18,007.57. This tech-driven rally comes on the heels of the worst weekly loss for the S&P 500 since April, highlighting investor optimism fuelled by Nvidia's significant gains and positive moves in other major tech stocks. The political landscape in the US also saw a dramatic shift with President Joe Biden dropping out of the presidential race and endorsing Vice President Kamala Harris, adding another layer of complexity to market dynamics.
Key Takeaways:
S&P 500 Marks Best Day Since Early June: The S&P 500 surged 1.1% to settle at 5,564.41, marking its best day since June 5. This robust recovery comes after the index experienced its worst weekly loss since April, dropping nearly 2%. The resurgence was primarily driven by renewed investor confidence in the technology sector, highlighting the resilience and pivotal role of tech stocks in the broader market recovery.
Nasdaq Composite Rallies Amid Tech Turnaround: The Nasdaq Composite rose 1.6% to close at 18,007.57, showcasing a strong comeback for technology stocks. Nvidia led the charge with a notable 4.8% gain, recovering from last week’s 8% pullback. Other tech giants, such as Meta Platforms and Alphabet, also contributed to the rally, each rising more than 2%. This rebound underscores the market's optimism toward tech stocks despite recent volatility.
Dow Jones Industrial Average Posts Modest Gains: The Dow Jones Industrial Average increased by 127.91 points, or 0.3%, to finish at 40,415.44. Despite the tech sector's robust performance, the Dow's gains were more modest, reflecting a broader, more cautious investor sentiment. This uptick, however, demonstrates sustained optimism and resilience among investors, even as the market navigates through recent economic and political developments.
European Markets React to U.S. Political News: European stocks closed higher on Monday as global markets reacted to the news of U.S. President Joe Biden dropping out of the presidential race. The pan-European Stoxx 600 index rose 1%, driven by significant gains in various sectors. The CAC 40 climbed by 91 points, or 1.21%, with notable performances from STMicroelectronics (up 2.88%), BNP Paribas (up 2.35%), and LVMH (up 2.15%). However, Ryanair shares plunged 17.5% after reporting a 46% drop in quarterly profit, which weighed on the travel and leisure sector, highlighting sector-specific challenges despite the overall market gains.
Asian Markets Fall as China Cuts Rates: Asia-Pacific markets experienced a downturn on Monday, influenced by unexpected rate cuts from China's central bank. The Hang Seng index in Hong Kong fell by 1.22%, and mainland China's CSI 300 lost 0.68% to close at 3,514.92. The People’s Bank of China surprised markets by lowering the short-term 7-day reverse repurchase rate to 1.7% from 1.8%, and trimming both the one-year and five-year loan prime rates by 10 basis points each. This move, aimed at stimulating economic activity, had mixed effects, with some markets reacting negatively. Japan’s Nikkei 225 fell by 1.16% to end at 39,599, dipping below the 40,000 mark for the first time in three weeks, signalling investor caution in the region.
Oil Prices Continue to Decline: Oil prices fell for a second consecutive session on Monday, hitting their lowest levels in over a month. Brent crude futures declined by 0.3% to $82.40 per barrel, while U.S. West Texas Intermediate (WTI) crude for August delivery dropped by 0.5% to $78.20 per barrel. The September WTI futures also fell by 45 cents to $78.19. The decline in oil prices reflects growing concerns over rising stockpiles and signs of weakening demand, as investors shifted their focus away from the political developments in the U.S. and towards fundamental market factors.
FX Today:
Gold Price Slides for Fourth-Straight Day as US Yields Rise: The XAU/USD is trading at $2,397, down 0.14%. For XAU/USD to extend its losses, sellers must keep spot prices below $2,400. In that event, the first support would be the 50-day Simple Moving Average (SMA) at $2,359. Once sellers clear the 100-day SMA at $2,315, further losses are seen before falling toward $2,300. Conversely, if XAU/USD stays above $2,400 and reclaims $2,450, it could challenge the all-time high of $2,483 before potentially hitting $2,500.
EUR/USD Rebounds Could See 1.0950 Retested: EUR/USD is projected to confront more upward resistance at the July peak of 1.0948, followed by 1.0981 and the key 1.1000 level. If bears reclaim control, the pair may approach the 200-day SMA of 1.0813 before falling to the June low of 1.0666. The loss of the May low of 1.0649 leads to the 2024 bottom of 1.0601. Overall, more gains are likely if the pair maintains trade above the key 200-day SMA. The 4-hour chart indicates some temporary consolidation with initial resistance at 1.0948, followed by 1.0981 and 1.1000. On the downside, the 100-SMA at 1.0838 is first, followed by the 200-SMA at 1.0793 and then 1.0709.
GBP/USD Subdued, Hovers Around 1.2900: The Pound Sterling begins the week virtually flat against the Greenback, trading at around 1.2925 after hitting a daily high of 1.2942. From a technical standpoint, the GBP/USD consolidates after rallying from 1.2600 to 1.3000 during the last three weeks. The pair pulled back from recent highs and faced solid support at 1.2894. For a bullish continuation, buyers must reclaim the 1.2950 psychological figure before testing the July 17 high at 1.3044. Once cleared, the next supply zone would be last year’s high at 1.3142. Conversely, if GBP/USD falls below 1.2900, the first support would be the June 12 high turned support at 1.2860. Further downside could lead to 1.2803, before aiming toward the 50-day moving average (DMA) at 1.2757.
Australian Dollar Extends Losses After PBoC’s Cut and Falling Copper Prices: The AUD/USD began the new week around 0.6640, largely due to falling copper prices and the People's Bank of China's rate cut of 10 basis points. While the AUD/USD pair has entered a correction period after early July's sharp gains, the main concern lies with the loss of core support around 0.6000-0.6040. Technical indicators such as the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) hint at weakening momentum, suggesting a deeper downside might loom unless the pair retains the mentioned range.
USD/CHF Mildly Gains at the Beginning of the Week: On Monday, the USD/CHF gained slightly to 0.8895. The short-term technical outlook for the pair is neutral to bearish. The USD/CHF is currently below the 20-day and 100-day Simple Moving Averages (SMA), focusing on whether buyers will defend the 200-day SMA. Meanwhile, technical indicators remain relatively level but in negative territory. Key support levels are at 0.8880 (the 20-day SMA), 0.8850, and 0.8830, while resistance levels stand at 0.8890, 0.8900, and 0.8930.
Market Movers:
Nvidia Shares Surge: Nvidia shares advanced about 4.8% on Monday, recovering some of the 8% pullback from last week. The rebound was attributed to a report from Reuters stating that Nvidia is working on a version of its Blackwell chips for the Chinese market, which would comply with current U.S. export controls.
CrowdStrike Plummets: CrowdStrike shares plunged 13.5%, continuing last week’s nearly 18% loss. The massive outage caused by a glitch in an update led to thousands of cancelled flights, significantly impacting investor confidence. Guggenheim downgraded the stock to a neutral rating from buy, citing potential delays in new deals for the company.
IQVIA Holdings Jumps on Earnings Beat: IQVIA Holdings' stock jumped more than 9.2% after the health tech company reported adjusted earnings of $2.64 per share on revenue of $3.81 billion for the second quarter. This surpassed analysts' expectations of $2.56 per share on revenue of $3.79 billion, highlighting the company's robust performance.
Verizon Shares Drop: Verizon shares fell around 6% following weaker-than-expected quarterly revenue. The telecommunications company reported sales of $32.8 billion, missing the FactSet consensus estimate of $33.05 billion. Adjusted earnings of $1.15 per share were in line with forecasts, but the revenue miss weighed on investor sentiment.
Tesla Prepares for Earnings: Tesla shares rose more than 5% ahead of the company’s earnings report on Tuesday. CEO Elon Musk announced that humanoid robots would be in production within the company next year, adding to the stock's positive momentum.
Chinese EV Stocks Surge: Shares of Chinese electric vehicle companies surged following the People’s Bank of China’s rate cuts. Xpeng moved 6.5% higher, while Nio and Li Auto gained more than 5% and 4%, respectively. The one-year loan prime rate was lowered to 3.35%, and the five-year LPR was reduced to 3.85%, providing a boost to the sector.
Mattel Soars on Acquisition Rumours: Mattel shares soared more than 15% after reports that private equity firm L Catterton has approached the toymaker with an acquisition offer. Sources indicated that there is no certainty of a deal, but the news drove significant interest in Mattel’s stock.
Semiconductor Stocks Rebound: Semiconductor stocks saw substantial gains as investors snapped up shares following a sharp sell-off last week. The VanEck Semiconductor ETF (SMH) jumped nearly 4%, recovering from a 9.6% decline last week. On Semiconductor and KLA Corporation each advanced more than 6%, while ASML Holding jumped over 5%.
As the markets closed on Monday, the strong performance of the S&P 500 and Nasdaq Composite highlighted a renewed optimism in the tech sector, despite last week’s downturn. Major tech stocks, led by Nvidia, pushed the indices to new heights, while other sectors showed mixed results. European markets reacted positively to the political developments in the US, and Asian markets experienced declines due to unexpected rate cuts by China’s central bank. Investors remain focused on upcoming earnings reports and central bank policies, which will continue to shape market sentiment. The rebound in tech stocks, coupled with significant movements in other sectors, underscores a cautious yet hopeful outlook as the markets navigate through these dynamic times.
