[Chart courtesy of MarketWatch.com]

1. Moving the markets

The major indexes started this session deep in the red, with Salesforce’s 20% drop due to a revenue miss and weak guidance setting a bearish background, while upcoming key inflation data created anxiety on the trading floors.

Despite this being a holiday shortened week, the major indexes are modestly in the red and seem to be on track to snap their five-week winning streaks. The Dow fared the worst by having lost more than 2% so far.

Higher bond yields affected bullish sentiment negatively, as safer investments with higher yields provided a risk-off alternative to equities. The line in the sand has been the 4.5% yield for the 10-year, and we are currently above that level.  

Despite this rollercoaster week, the major indexes look to close out the month of May with solid gains, with the Nasdaq and S&P so far being in the green by 7% and 4% respectively.

Still, I see more choppiness ahead, as concerns about consumer health are on traders’ minds along with the path of interest rates, both of which will have a direct impact on market direction.

Bond yields slipped, but that did not assist Nvidia, as the tech giant pulled back almost 4%. Small Caps saved the day for equities by rallying around 1%, while the dollar dropped and erased yesterday’s gains.

Crude oil prices dived, but gold found support with the precious metal adding almost 1%. Bitcoin joined the party and increased over 2%.

All eyes are now on tomorrow’s personal consumption expenditure price index (PCE), which serves as the Fed’s favorite inflation gauge. It’s expected to come in around 2.7% for April, which is still above the Fed’s 2% target.  

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[Chart courtesy of MarketWatch.com]

1. Moving the markets

All focus was on Nvidia, with the tech darling dumping and pumping and having a volatile session. It vacillated sharply around its unchanged line and was in danger of scoring its first negative session since its blowout earnings.

In the end, the stock closed higher by a scant +0.8%, but it hit a new record high.

Nevertheless, the major indexes were affected by that volatility, as this last bastion of strength rattled traders’ nerves. The major indexes headed south led by the Dow with a loss of over 1%, while breaking its 50-day and 100-day M/A.

The pullback was broad, with all 11 S&P sectors trading down and 450 members of the index being lower as well. The Dow showed a similar fate, while more than two-thirds of its components slipped into the red.  

Not helping matters were bond yields, which ticked higher for the second day, as the 10-year popped above 4.6%, a level that can be troublesome for market direction. A weak Treasury auction disappointed but gave the bearish crowd a moment to cheer.

Still, month to date, the majors are up with the Nasdaq leading the pack with a gain of around 8%, followed by the S&P 500 with an almost 5% advance.

The session was a mixed bag, as rate-cut expectations headed south, and bond yields surged, with the 2-year attacking its 5% level but failing to conquer it. The most shorted stocks did what they do best in this environment, namely imitating a swan dive.

Surprisingly, the MAG7 stocks bucked the trend and headed higher. The dollar followed rates and cruised to its early May level, which triggered a sell-off in gold and crude oil. Bitcoin showed weakness as well and meandered back down to its $68k range.

Will the markets succumb to more weakness, or will they be able end the month of May with a bang to the upside? There are only two days left.

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[Chart courtesy of MarketWatch.com]

1. Moving the markets

The Nasdaq powered to a new high today, and briefly crossed above its 17k milestone, thanks to Nvidia’s continued upward momentum. The tech-heavy index led the major indexes in a sluggish start to the last trading week of May.

All three major indexes look to close out a strong month after having scored new all-times at various points, despite the Dow pulling back today. Traders interpreted inflation data as “soft,” relentlessly clinging to hope that the Fed’s potential rate cuts might become reality sooner rather than later. Better than expected earnings, thanks to a low bar, lifted bullish sentiment.

On the other hand, some strong economic data points and fresh concerns about consumers pulling back on spending has created a new wildcard, which likely has reigned in optimism for the direction of interest rates. Fed mouthpiece Kashkari did not help matters by adding that he wants to see “many more months” of data pointing to easing inflation before supporting a cut.

Nvidia owned all bullish sentiment as the stock added over 7% for the session and climbed to within $100 billion of Apple’s market cap.

However, other asset classes moved higher as well. Oil prices jumped over 3% to close above $80, gold shot back above $2,350 and Bitcoin touched its $70.5k level before falling back.

Bond yields headed higher, as some macro data showed signs of improvement, such as home prices and consumer confidence, but inflation expectations were rising. The dollar advanced and followed the direction of yields.

The comparison of Nvidia to Cisco Systems seems to have run its course, as this chart shows.

However, the question is: Can history still repeat itself but just from a higher level?

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NASDAQ LEADS MARKET REBOUND AS TECH STOCKS RALLY DESPITE RATE CUT HOPES DIMMING

[Chart courtesy of MarketWatch.com]

1. Moving the markets

The major indexes inched higher trying to recover from yesterday’s drubbing, the worst since March 2023. The Nasdaq led the rebound, and the Dow lagged.

Despite hopes being dashed that the Fed may cut rates this summer, enthusiasm for Nvidia and other tech companies lifted the major indexes with the Nasdaq sprinting ahead by over 1%.

The latest earnings reports were mixed with Workday falling more than 10%, while Intuit surrendered over 8% due to weak guidance. Deckers Outdoor bucked the trend with an 11% surge.

On the economic side, demand for Durable Goods surprised to the upside, as orders for long-lasting items like appliances, cars and airplanes rose 0.7% for the month, which was better than the consensus estimate for a 1% drop. Despite new orders being flat, these robust data points diminished traders’ hopes for a rate cut.

Services and Manufacturing data also surpassed forecasts from economists, while weekly jobless claims signaled the weakness in the labor market may have halted. Again, none of these numbers will affect the Fed’s current position of “higher for longer.”

As ZH pointed out, after six straight weeks of ‘weakness’, US Macro Surprise data surged higher this week (good news) — it’s biggest positive weekly shift since January. To no surprise, this sent rate cut expectations tumbling.

The MAG7 stocks recovered from yesterday’s sell off and rallied for the fifth straight week to a new record high, thereby surpassing the comparison to Cisco’s historical performance.

Bond yields climbed to end the week higher, with the 2-year storming towards its 5% level. That was its biggest weekly yield increase in almost 2 months.

The dollar rode the roller coaster but ended higher after last week’s losses. That pulled gold off its lofty level, but the precious metal easily defended its $2k marker.

Bitcoin recovered from yesterday’s drop and bounced back to $69k, as oil prices ended lower on the week and losing its $78 support zone.

A tip of the hat goes to ZH for pointing out another decoupling, namely between US Reserve balances and Market Capitalization. It’s another alligator snout that eventually will snap shut.   

If history is any indication, market capitalization will take a hit—and that would mean lower equity prices.  

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