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Tech bulls continue to fuel Wall Street’s rally ahead of US CPI

Tesla

Wall Street kicked off the week on a front foot as tech stocks extended the bull run ahead of the US key inflation data and the Fed’s rate decision. The world-largest market-cap tech giant, Apple’s stocks closed at a record high of nearly 184. And Tesla’s shares posted the longest winning streak, gaining for 11 consecutive sessions, up 146% from its January low. Both Nasdaq and the S&P 500 rose to the highest levels since April 2020. By contrast, the energy sector extended losses due to a further slump in oil prices. The WTI futures tumbled more than 4% to a six-week low on sluggish demand outlooks, given China’s disappointing economic data recently.

The Fed is widely expected to pause rate hikes on a pending decision tomorrow, but many see the central bank may still be far away from ending its hiking cycle. A robust labor market and a well-above-targeted CPI are the elements that build bets for hedge funds to continue short selling on short-dated US treasuries, with the 2-year bond yield sticking at a 3-month high level of 4.58%. The US dollar index drifted lower but bounced off a session low, pressuring gold prices.

A “hawkish shock” is something that investors need to be cautious of after both RBA and BOC unexpectedly continued their rate hike campaign last week. And the ECB and BOJ are also due to release their rate decisions following Fed’s announcement on Thursday.   

Chinese stock markets are showing resilient moves in June so far as weak economic data strengthened bets of more stimulus measures to be carried out by the government. A notable trend is that the Chinese EV maker stocks jumped on positive growth outlooks, with XPeng up 11% and Nio rising 5% in the Hong Kong Stocks Exchange on Monday. Most Asian markets are set to open higher, with ASX 200 futures up 0.36% and Nikkei 225 advancing 0.74%, while the Hang Seng Index futures were down 0.23%.

Price movers:

  • 8 out of 11 sectors in the S&P 500 finished higher, with technology and consumer discretionary leading gains, up 2.07% and 1.74%, respectively. The energy sector was the worst performer, down 0.97% in the session. Financial stocks also lagged broad markets, down 0.09%.
  • Oracle’s shares rose 3% in after-hours trading following strong earnings reports due to a jump in the cloud revenue. In the May quarter, the company reported earnings per share of US$1.67 on revenue of US$13.84 billion, well above the expected US$1.58 and US$13.73, respectively. Its key revenue in cloud services and license support, jumped 23% from a year ago.  
  • Tesla’s shares posted the longest winning streak in history, to an eight-month high of just under 150. The EV maker’s stocks jumped following the news that GM and Ford will adapt to Tesla’s Supercharger last week, along with the recent AI-fueled tech frenzy.
  • The FTC seeks to block Microsoft’s acquisition of Activision Blizzard. The Federal Trade Commission is set to file for an injunction to stop the US $68.7 billion deal before the deadline of 18 July.
  • Crude oil prices tumbled to below $70 on the deteriorated demand outlook. Oil markets extended decline as traders bet for further weakened demands despite more output cut plans by the OPEC +. China’s faltering economic recovery, Fed’s possible “higher for longer” rate campaign all added to the downside elements.
  • Gold faces pivotal resistance of 1,990 at the 50-day moving average. A strong USD, high bond yields, and risk-on sentiment are the fundamental factors that pressed on precious metal markets lately. The double-top pattern may continue to take gold lower toward 1,900 from a technical perspective.

ASX and NZX announcements/news:

  • Infraitil (ASX/NZX: IFT) announces the opening of a NZ$100 million retail share offer, which is part of the equity raise announced on 7 June 2023. The equity raises comprise a NZ$750 million underwritten placement.

Today’s agenda:

  • New Zealand Visitor Arrivals for April
  • Australian Westpac Consumer Sentiment for June and NBA Business Confidence for May
  • US CPI for May


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