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25.06.202409:19 Forex Analysis & Reviews: As the West Changes Investing Course, the East Reacts with Indexes Rising

Exchange Rates 25.06.2024 analysis

The Dow hit a one-month high on Monday, while the Nasdaq fell more than 1% as investors switched from artificial intelligence stocks to laggards on expectations that the Federal Reserve will cut interest rates this year.

The S&P 500 and Nasdaq ended lower as investors shifted away from tech stocks, whose overextended gains have fueled this year's rally. However, nine of the 11 major S&P 500 industries rose.

Shares of Nvidia (NVDA.O) have fallen 6.68% in three sessions as observers noted profit-taking after last week's meteoric rise made the company the world's most valuable.

Nvidia's decline triggered a sell-off in the tech sector, leading to significant losses. On Monday, the S&P 500 (.SPX) was down 0.3%, the Nasdaq (.IXIC) was down more than 1%, and the SOX semiconductor index (.SOX) lost more than 3%.

Other chipmakers, including Taiwan Semiconductor Manufacturing, Broadcom (AVGO.O), Marvell Technology (MRVL.O) and Qualcomm (QCOM.O), fell 3.53% to 5.7%, leading the SOX index to fall 3.02%.

"The market is selling some winners and buying some laggards," said Jack Janasiewicz, chief strategist at Natixis Investment Managers. "This is due to expectations of soft inflation data coming out on Friday."

Tech (.SPLRCT) and consumer discretionary were the only sectors among the 11 S&P 500 indexes to decline, while energy led the gains, rising 2.73%.

"There's a rotation into value sectors like financials, energy and utilities. Energy is also benefiting from a small jump in oil prices," said Ed Clissold, chief U.S. strategist at Ned Davis Research.

Oil prices rose Monday, supporting gains in energy and oilfield services stocks.

The Dow Jones Industrial Average (.DJI) jumped to snap a five-day winning streak. The Russell 2000 small-cap index (.RUT) also hit a one-week high, signaling broader gains in the market.

With the exception of Nvidia and other chipmakers, "the rest of the market is positive, expecting a soft landing," said Carl Ludvigson, managing director at Bel Air Investment Advisors.

Investors are focused this week on Friday's PCE price index report, the Fed's preferred measure of inflation, which is expected to show modest price pressures.

Investors still expect two rate cuts this year, pricing in a 61% chance of a 25 basis point cut in September, according to FedWatch LSEG data. The Fed's latest forecast calls for one rate cut in December.

San Francisco Fed President Mary Daly has said she doesn't think rates need to be cut until policymakers are confident that inflation is approaching 2%.

The S&P 500 (.SPX) lost 15.73 points, or 0.29%, to end at 5,448.89. The Nasdaq Composite (.IXIC) fell 190.19 points, or 1.09%, to 17,499.17. The Dow rose 257.99 points, or 0.66%, to 39,408.32.

Other big stories this week include durable goods data, weekly jobless claims, final first-quarter GDP data and a year-over-year rebound in the Russell Index. There will also be some quarterly earnings reports.

President Joe Biden and his Republican rival Donald Trump will debate in Atlanta on Thursday, which could impact the outcome of the November election, which polls show is neck-and-neck.

Meta Platforms (META.O) shares rose after a report that the Facebook parent is discussing integrating its generative AI model into Apple's (AAPL.O) new iPhone AI system. Apple shares also rose.

RXO (RXO.N) announced plans to buy United Parcel Service (UPS.N) and launch a new unit, Coyote Logistics, for $1.025 billion.

Advance stocks outnumbered decliners 2.25-to-1 on the New York Stock Exchange, with 179 new highs and 48 new lows.

The S&P 500 posted 35 new 52-week highs and one new low, while the Nasdaq Composite posted 49 new highs and 128 new lows. Trading volume on U.S. exchanges was 10.94 billion shares, below the 11.92 billion average over the past 20 trading days.

European stocks may see some recovery on Tuesday after their rally earlier in the week.

The tech loss has turned into a gain in value, as seen in the Dow Jones Industrial Average (.DJI), which is up 0.7%.

This rotation has also become relevant in Asia. For example, AI-related stocks on Japan's Nikkei 225, such as SoftBank Group (9984.T), are retreating from their highs, while money is returning to the battered Toyota Motor (7203.T).

The positive news for investors is the overall gain in Asia-Pacific stock indices. Among the major indices, only tech-heavy Taiwan (.TWII) showed a decline. While the Nikkei (.N225) is up just half a percent, the Topix (.TOPX) is up almost 1.5%.

Geopolitics also requires attention. The mood could change quickly ahead of the first round of snap elections in France this weekend. So far, the far-right's efforts have been effective in calming fears of financial restraint.

As a result, the euro has rebounded sharply to $1.0740 after falling to $1.0671 on Friday.

Also worth watching is the European Commission's evolving relationship with Apple and China. Beijing is calling on the EU to scrap proposed tariffs on Chinese electric vehicle imports before they come into effect on July 4, and Chinese officials are seeking a compromise in talks in Brussels this week.

Apple needs to change how its App Store works or face large antitrust fines.

Thomas Frank,
Analytical expert of InstaSpot
© 2007-2024
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