Wall Street continued its divergent moves between cyclical stocks and tech shares, with Dow Jones ending in the red, dragged lower by the energy sector. Conversely, the Nasdaq 100 extended its tech euphoria amid the prevailing buying frenzy in AI-related mega caps.
Nvidia’s shares hit US$418 at the day high, swiftly hitting a $1 trillion market cap before pulling back to just above US$400. Tesla stock jumped 4% to a two-month high after Elon Musk met with China’s foreign minister. And Netflix’s shares rose 3.8% following a valuation upgrade by Jefferies. On the other hand, caution remains amid the debt bill hearing at Congress, weighing on markets overall, with the three benchmark indices pulling back from session highs.
US bond yields slipped, pressing on the US dollar and sparking a rebound in gold prices. Crude oil tumbled 4%, with WTI futures falling below US$70 per barrel at a two-week low. Economic worries linger around sticky inflation, the Federal Reserve’s hawkish monetary policy, and China’s stumbling economic recovery. Investors need to be mindful of how long the tech-powered rally can hold stock market bulls in such an economic cycle.
- Eight out of 11 sectors in the S&P 500 finished lower, with consumer staples and energy stocks leading losses, down about 1%. The growth sectors, such as consumer discretionary and technology, outperformed, up 0.76% and 0.63%, respectively. Real estate stocks also ended in the green due to a slip in rates.
- Tesla tightens its relationship with China, despite geopolitical tensions. CEO Elon Musk met with Chinese foreign minister Qin Gang and expressed the intention to keep expanding the business in China, according to a government statement. Elon is the third US tech’s boss who visited China, following Apple’s Tim Cook and Mercedes-Benz’s Ola Kallenius.
- 'Sell in May' continued in the Chinese stock markets, with the Hang Seng China Enterprises Index and the Hang Seng Index slumping to the lowest levels since November 2022, amid concerns about the country’s sluggish economic trajectory and intensifying US-China geopolitical tensions. Some economists believe the faltering economic rebound will promote China to carry out further stimulus measures.
- The slump in oil prices may cause a further sell-off in growth-sensitive commodities, such as copper and iron ore. Demand for crude oil is an economic gauge of the world’s economy. The downtrend movement in crude prices reflects a gloomy economic outlook, typically of China. From a technical perspective, WTI futures may approach the year-low of just above US$60 per barrel.
- Gold futures rebounded as the US dollar softened following a slump in bond yields. Gold may still be considered one of the best haven assets that defend against a possible economic recession. The debt ceiling deal may trigger another rally in precious metal prices, with potential near-term resistance at the 50-day moving average of around US$1,991 per ounce.
ASX and NZX announcements/news
- No major announcements
- RBA governor Phillip Lowe speaks
- Japan retail sales for April (y/y)
- Australia April CPI (y/y)
- Chinese manufacturing and service PMIs for May (y/y)
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