Source: Wall Street News Author: Li Dan
In June, the US ADP reported unexpected drop in non-farm payrolls, with an increase in the number of unemployment claims and a sharp contraction in the ISM service sector index, escalating the bets on the Fed's rate cut in September. The S&P index has hit a new high for two consecutive days, the Nasdaq has hit a new high for three consecutive days, and the Dow has significantly narrowed its decline in the late trading session. US stocks such as Google, Apple, Microsoft, and Taiwan Semiconductor have all reached new highs, while Tesla has risen 35% in the past seven days and chip stocks have risen nearly 2%. Chinese concept stocks rose by a strong 3.3%, with Douyu rising more than 42%, and NIO Inc. and Xpeng both rising more than 11% during the session. German, French, and Italian stock indexes all rose by more than 1%. The yields of US Treasury bonds with maturities ranging from 5 to 10 years have fallen more than 10 basis points. The US dollar hit a three-week low, and the yen hit a 38-year low below 162 for three consecutive days, while the offshore RMB fell below 7.31 and then rose above 7.30. The EIA oil reserves have dropped sharply by more than 12 million barrels, suggesting bullish demand, and oil prices have risen more than 1%, hitting a two-month high. Spot gold has risen more than 1%, briefly breaking through $2360 to hit a two-week high, while silver has risen nearly 4% to surpass $30, and London copper, zinc, and nickel have risen by about 2%.
On the eve of Independence Day, the United States released several soft economic data, adding signs of slow economic growth, driving down interest rate expectations. For example, the US June ISM service index was 48.8, significantly lower than the expected 52.6, with the fastest contraction rate in four years, reversing the situation of a rebound in May data to a nine-month high.
At the same time, the increase in initial jobless claims and the underperformance of ADP employment data showed a cooling labor market. The number of initial jobless claims in the week of June 29 rose to a new high since January this year, at 238,000. The ADP added 150,000 new jobs in June, significantly lower than the expected 165,000, the lowest level in four months.
Investors have optimistic expectations for the Fed's interest rate cut. The CME Fed Watch tool shows that the possibility of a 25bp rate cut in September has risen from 63% to 66.5%. Investors still expect the Fed to cut interest rates at least once this year. After the data was released, both US bond yields and the US dollar fell, with gold rising and technology stocks showing strong gains, driving the S&P 500, Nasdaq, and Nasdaq 100 to record highs at the close. In addition, due to the sharp drop of over 12 million barrels in US EIA crude oil inventories, and the long-term conflict between Israel and Hamas in Gaza maintaining the risk premium of crude oil futures, international oil prices rose more than 1%.
As Thursday is Independence Day in the United States, the US stock market is closed all day on Thursday and closed three hours early on Wednesday, with a closing bell at 1:00 am Beijing time.
The minutes of the Fed meeting, which will be released later, show that officials had different views on how long high interest rates should last at the June policy meeting. Fed officials said they were waiting for more evidence of inflation cooling. Although "some" officials emphasized the need for patience, "some" participants specifically noted that further weakness in the labor market could lead to a substantial increase in the unemployment rate.
Internationally, the slowing demand weakened the expansion of the eurozone economy. The final value of the composite PMI in the eurozone in June was slightly higher than expected, but at a three-month low. At the same time, the eurozone's PPI in May continued to decline. ECB policy makers and Bank of Greece Governor Stournaras said recent data slightly strengthened the possibility of further rate cuts, and two more cuts this year seemed reasonable. Even with two more rate cuts, ECB rates would still be restrictive. The (eurozone) service inflation should not be overinterpreted.
Looking ahead, the UK will hold a general election on Thursday and non-farm payroll data will be released in the United States on Friday. Economists expect non-farm payroll employment to increase by 190,000, down from last month.
The S&P and Nasdaq set new highs again, with Tesla up 6.54%, Nvidia up 4.57%, Google, Apple, Microsoft all reaching new highs, and European stocks generally rising.
On Wednesday, July 3, the technology-driven Nasdaq accelerated after a low opening for the first hour and closed at a daily high; the S&P 500, which opened low, fluctuated and rose throughout the day, closing at a new high; the Dow, where blue-chips gathered, opened 27 points higher but fell and hit a daily low during the day, rebounding slightly by the end of the day and only slightly falling. The Russell 2000 small cap index rose 0.76% before giving back most of the gains and closing up slightly. The Nasdaq had the largest gains among major indexes.
At the close, the S&P, Nasdaq and Nasdaq 100 all hit new closing highs, with the S&P 500 and Nasdaq hitting record highs for the 33rd and 22nd times respectively this year, and the Dow Jones Industrial Average falling slightly by 0.06%. The Russell 2000 small cap index broke away from a three-week low.
The S&P 500 rose 28 points, or 0.51%, to 5537.02, hitting a new closing high for the second day in a row. The Dow fell 23.85 points, or 0.06%, to 39,308.00. The NASDAQ rose 159.54 points, or 0.88%, to 18,188.30, marking a new closing high for the third straight day.
The Nasdaq 100 rose 0.87%, hitting a new closing high for the second straight day; the Nasdaq Technology Market Cap Weighted Index (NDXTMC), which measures the performance of technology stocks in the Nasdaq 100, rose approximately 1.34% to reach a new closing high; the Russell 2000 small cap index rose 0.14%; the "panic index" VIX rose 0.5% to 12.09.
Of the 11 sectors in the S&P 500, the information technology/technology sector rose 1.48%, breaking through the historical highest level of the closing of June 20; the raw materials sector rose more than 0.8%, the energy sector rose more than 0.4%, the optional consumer sector rose more than 0.3%, the telecommunications sector rose 0.2%, while the healthcare sector fell more than 0.7%.
12 stocks in the S&P 500 index hit a 52-week high, with 8 hitting an all-time high, such as intercontinental exchange, jp morgan, eli lilly and co, apple, fair isaac, microsoft, and iron mountain, all hit all-time highs.
Goldman Sachs released a report on Wednesday stating that the recent annual adjustments have increased the proportion of healthcare and financial industries in small-cap stocks, while the proportion of the technology industry has correspondingly decreased. The Russell 2000 index is now more dependent on the financial industry, particularly regional banks, which have put pressure on small-cap stock indices despite the strong performance of large-cap stock indices.
Ryan Detrick, Chief Market Strategist of Carson Group, pointed out that July 3rd is historically the most profitable day of the summer. Since 1950, the average daily increase of the S&P 500 index on July 3rd is 0.31%.
Jim Paulsen, author of Paulsen Perspectives newsletter, said this is the only bull market in post-war history to exist under the tightening policy of the Fed. Although the S&P 500 and other indices have reached new highs, this bull market is actually "narrow" because only a few stocks have benefited from the Fed's interest rate hikes, which is not common in historical bull markets. If the Fed decides to cut interest rates, I believe the stock market will have more stimulus factors, and we may usher in a new bull market. After a strong performance in the first half of 2024, the stock market is expected to continue its upward trend.
However, Wall Street veteran Richard Bernstein believes that although the current US stock market seems to be full of bubbles, with the rally heavily concentrated in large-cap stocks, it is unlikely to trigger another economic crisis given the accelerating corporate profitability and healthy banking system. A financial storm may be brewing, and the Fed seems to have failed to learn from history.
Most of the star tech stocks closed higher. Tesla led the seven sisters of the US stock market, up 6.54% to $246.39, rising for the seventh consecutive trading day, the longest continuous rise in a year, with a cumulative increase of nearly 34.95% since the close on June 24. In addition, Apple rose 0.58%, Microsoft rose 0.32%, Google A rose 0.31%, Metaverse Meta rose 0.09%, while Amazon fell 1.21%.
Chip stocks rebounded collectively. The Philadelphia Semiconductor Index rose 1.92%, and the SOXX industry ETF also rose 1.67%. Nvidia rose 4.57%, and the double long ETF of Nvidia rose 8.99%.
In addition, TSMC ADR rose 3.86% to an all-time high, ARM rose 2.92%, Applied Materials rose 1.02%, KLA Corp rose 1.69%, Broadcom rose 4.33%, Micron Technology rose 3.19%, Intel rose 0.51%, Qualcomm rose 1.82%, while AMD fell 0.25%.
Most AI concept stocks rose. BigBear.ai rose 2.07%, C3.ai rose 1.67%, Super Micro Computer rose 1.17%, Oracle rose 0.77%, Snowflake rose 0.66%, CrowdStrike rose 0.55%, Palantir rose 0.08%, while SoundHound.ai fell 0.25% and Dell fell 0.56%.
Chinese concept stocks outperformed the US stock market. The KWEB China Internet ETF rose over 3%, the CQQQ China Technology ETF rose nearly 3%, and the Nasdaq Golden Dragon China Index (HXC) rose 3.3%, breaking through 6,000 points to a two-week high.
Among the popular stocks, new car makers rose sharply, with Ji Xianneng up 9.28%, Xpeng up 9.04%, Nio Inc up 7.51%, and Li Auto Inc up 6.53%. Douyu was the top gainer, up more than 42%, followed by Huya and Zhihu, up more than 10%, Baidu up 3.67%, JD.com up 2.99%, Tencent Holdings (ADR) up 2.89%, PDD Holdings up 2.58%, Alibaba up 2.57%, and Netease up 2.09%. The board of directors of Douyu announced a special dividend of about $9.76 per share.
On the news front:
Novo Nordisk: Novo Nordisk was hit by reports of serious eye diseases caused by weight-loss drugs, with a deep intraday decline of more than 4.8%. On the other hand, as the US announced its goal of lowering the price of weight-loss drugs, the ADRs of Novo Nordisk and other biotech companies fell, dragging down the performance of the healthcare industry.
Tesla announced on its official Weibo account on Wednesday night that the second-generation humanoid robot Optimus will make its debut at the 2024 World Artificial Intelligence Conference in Shanghai from July 4th to 7th and witness the "new evolution of humanoid robots." Wedbush raised its target stock price from $275 to $300, and Bank of America increased its target price to $260.
Amazon has reportedly decided to discontinue its Astro for Business safety robots and shift its focus to home robots.
According to disclosure data submitted to the regulatory authorities, Huang Renxun sold 1.3 million shares of Nvidia in June, with these stocks estimated to be worth nearly $169 million, setting a new record for personal monthly stock sales.
Li Auto Inc. launched a zero-down-payment car purchase plan to boost sales. In addition, according to data from the China Passenger Car Association, the new energy vehicle market has sold 864,000 units from June 1 to June 30, up 30% year-on-year and 6% month-on-month.
Retail investors remain hot for stocks. Koss Corp soared 143.81%, Gamestop rose 1.63%, BlackBerry rose 1.63%, while AMC Entertainment fell 3.45%.
Investors are preparing for two national parliamentary elections, with the UK holding elections on Thursday and France holding the second round of parliamentary elections on Sunday. On Wednesday, European stocks rose across the board:
The pan-European Stoxx 600 index rose 0.74%, while the euro area STOXX 50 index rose 1.21%.
Germany's DAX 30 index rose 1.16%, France's CAC 40 index rose 1.24%, Italy's FTSE MIB index rose 1.09%, the UK's FTSE 100 index rose 0.61%, and Spain's IBEX 35 index rose 1.32%.
Weak economic data weighed on US bond yields, with 5- and 10-year US Treasury yields falling more than 10 basis points during intra-day trading.
The ISM data for the service sector boosted expectations of a Fed rate cut. At the close, the two-year Treasury yield, which is sensitive to interest rates, fell 2.9 basis points to 4.7059%; the 10-year basic bond yield fell 7.29 basis points to 4.3587%.
The two-year Treasury yield, which is more sensitive to monetary policy, fell sharply by 7 basis points to 4.67%, hitting its lowest level in three weeks. The 10-year bond yield fell 10 basis points to 4.33%, further distancing itself from the one-month high since May 31. The 5- and 7-year Treasury yields both fell 10 basis points at one point, and the 30-year long bond yield fell more than 9 basis points.
Earlier this week, medium- to long-term US bond yields jumped by double digits as the odds of Donald Trump winning the presidential election increased.
The eurozone's benchmark 10-year German bund yield fell 1.7 basis points to 2.585% at the close and traded between 2.642% and 2.567% during intra-day trading. The two-year German bond yield rose 1.3 basis points to 2.918% and traded between 2.894% and 2.952% during intra-day trading.
The French 10-year Treasury yield fell by 6.7 basis points, the Italian 10-year Treasury yield fell by 7.3 basis points, the Spanish 10-year Treasury yield fell by 6.5 basis points, and the Greek 10-year Treasury yield fell by 6.9 basis points. The UK's 10-year Treasury yield fell by 7.6 basis points to 4.172%.
As expectations of rate cuts rose, the US dollar fell more than 0.3%, and the Japanese yen almost fell to 162.
The DXY, which measures the dollar against six major currencies, fell 0.35% to 105.347 points. There was a significant dive in the US ISM non-manufacturing data, with a new low of 105.049 points, but no significant fluctuations were seen after the release of the Federal Reserve meeting minutes.
The Bloomberg Dollar Index fell 0.25% to 1265.88 points, and traded between 1270.52-1262.35 points during the day.
Offshore renminbi (CNH) against the US dollar reported 7.3032 yuan, up 38 points from the New York closing on Tuesday, with a new low in US ISM non-manufacturing data.
The US dollar rose 0.16% against the yen to 161.71, while the euro rose 0.40% against the US dollar and the British pound rose 0.55% against the US dollar. The US dollar fell 0.24% against the Swiss franc.
Most mainstream cryptocurrencies are down. The market value of the largest leader, Bitcoin, fell 3.70% to $59,885.00. The second-largest, Ethereum, fell 4.35% to $3,277.00.
The sharp drop in US crude oil and gasoline inventories indicates an increase in oil demand, and international oil prices rose by nearly 1.3%.
WTI August crude oil futures rose $1.07, or more than 1.29%, to $83.88 per barrel. Brent September crude oil futures rose $1.10, or more than 1.27%, to $87.34 per barrel.
When the US stock market hit a new low in the morning, US oil hit a low of $0.35, or 0.42%, to $82.46, while Brent oil fell deeply by $0.35, or 0.4%, to $85.89. Later, it accelerated and hit a new high of the day. US oil rose to $83.93, up $1.12, or 1.35%, and Brent oil rose to $87.39, up $1.15, or 1.33%.
According to the US Energy Information Administration (EIA), US EIA crude oil inventories fell by 12.16 million barrels last week, with analysts expecting a decrease of 411,290 barrels and the previous value increasing by 3.591 million barrels. US EIA crude oil inventories fell by more than 12 million barrels last week, reaching a new low since July 2023, and gasoline inventories decreased by 2.2 million barrels. In addition, aviation fuel exports hit a seasonal record high. Oil exports rebounded to 4.4 million barrels per day.
According to the latest data from the American Automobile Association (AAA), gasoline prices have risen slightly due to the approaching Independence Day holiday, currently averaging $3.51 per gallon, an increase of 2 cents from last week. At the same time, AAA predicts that a record high of 60 million Americans will choose to drive during this long weekend and enjoy the holiday.
Analysis shows that the significant drop in US inventories means that oil demand will rise. Matt Smith, chief oil analyst at Kpler, said: "Although refining activity has increased, gasoline and fractional oil inventories have unexpectedly declined, reflecting an increase in demand for both. Especially gasoline, as the Independence Day holiday approaches, gas stations have increased their reserves, leading to a surge in gasoline demand."
In addition, the impact of hurricanes on oil prices is less than the decline in oil inventories. The latest forecast shows that the hurricane is unlikely to have a major impact on offshore oil production, and traders’ concerns about supply issues have eased. Helima Croft, global commodity strategy manager at RBC Capital Markets, observed that as the US's dependence on offshore oil production declines, the impact of hurricanes on the oil market becomes less obvious.
US August natural gas futures fell by about 0.70%, to $2.418 per million British thermal units. US August gasoline futures traded at $2.6013 per gallon, and US August heating oil futures traded at $2.6343 per gallon.
The latest data released by the US Energy Information Administration shows that US natural gas inventories increased by 32 billion cubic feet, exceeding the market's expected 29 billion cubic feet. Although the current natural gas inventory is 18.8% higher than the seasonal average level, due to the increase in production and the oversupply of the market, the price of natural gas is still close to the low point in the past seven weeks.
Thanks to the heating up of the market's expectations for the Fed's rate cut in September, gold prices rose by more than 1%, approaching a two-week high, and copper rose by more than 2%, rising for four consecutive days.
COMEX August gold futures rose by about 1.42% to $2,366.6 per ounce at the close, and COMEX July silver futures rose by about 3.88% to $30.81 per ounce.
Spot gold continues to rise, the US stock market hit a new high in the morning, rising by more than 1.5% or $35, breaking through the integer level of 2360. Spot silver rose by nearly 3.9%, breaking through the 30.5 integer level.
New York independent metal trader Tai Wong analyzed: "Driven by the ADP employment and jobless claims data, the precious metals and base metals markets have risen across the board, further confirming the trend of economic slowdown and likely to lead to the first rate cut in September. Many investors are trying to seize the opportunity before the weak employment report is released on Friday."
In other precious metals, platinum prices rose by 1.8% and palladium prices rose by 2.7%.
The weakness of the US dollar has led to a rise in London's basic industrial metals:
The economic indicator "Copper Doctor" rose by $196, an increase of more than 2.02%, to $9868 per ton. London aluminum rose by $26, an increase of 1.03%. London zinc rose by $68, an increase of about 2.33%. London lead rose by $20, to $2222 per ton. London nickel rose by $319, an increase of more than 1.87%. London tin rose by $441, an increase of about 1.34%.
Editor/Lambor