Traders Market Weekly: it’s a Mad, Mad World of Political Uncertainty

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    June 23, 2024 FEAR NOT Brave Investors Where have we been and where are we going? Join our weekly market thread on Traders Community… Image: Cracks Ap
    [See the full post at: Traders Market Weekly: it’s a Mad, Mad World of Political Uncertainty]


    Dow 39,411.21 260.88 0.67%
    S&P 500 5,447.87 -16.75 -0.31%
    Nasdaq 17,496.82 -192.54 -1.09%
    VIX 13.43 0.23 1.74%
    Gold 2,346.20 15.00 0.64%
    Oil 81.68 0.95 1.18%


    Dow 39,112.16 -299.05 -0.76%
    S&P 500 5,469.30 21.43 0.39%
    Nasdaq 17,717.65 220.84 1.26%
    VIX 12.93 -0.40 -3.00%
    Gold 2,331.70 -12.70 -0.54%
    Oil 80.79 -0.84 -1.03%

    and some GOAT DISCO & early rap :)


    Dow 39,127.80 15.64 0.04%
    S&P 500 5,477.90 8.60 0.16%
    Nasdaq 17,805.16 87.50 0.49%
    VIX 12.55 -0.29 -2.26%
    Gold 2,309.50 -21.30 -0.91%
    Oil 80.80 -0.03 -0.04%


    Dow 39,164.06 36.26 0.09%
    S&P 500 5,482.87 4.97 0.09%
    Nasdaq 17,858.68 53.53 0.30%
    VIX 12.24 -0.31 -2.47%
    Gold 2,338.50 25.30 1.09%
    Oil 81.88 0.98 1.21%


    Equity indices in the Asia-Pacific region ended the week on a mostly higher note.

    Japan’s Nikkei: +0.6%,
    Hong Kong’s Hang Seng: unchanged,
    China’s Shanghai Composite: +0.7%,
    India’s Sensex: -0.3%,
    South Korea’s Kospi: +0.5%,
    Australia’s ASX All Ordinaries: +0.1%.


    Continued weakness in the Japanese yen lifted the USD/JPY pair past the April peak (160.22), which prompted an intervention from Japanese authorities.
    Japan’s top currency diplomat Kanda will retire at the end of July and will be replaced with a current official from the Ministry of Finance.
    The Bank of Japan’s meeting minutes with a bond market group showed growing expectations for rising rates and insufficient JGB market depth due to reluctance of foreign investors.
    June Tokyo CPI 2.3% yr/yr (last 2.2%) and Tokyo Core CPI 2.1% yr/yr (expected 2.0%; last 1.9%).
    May Unemployment Rate 2.6%, as expected (last 2.6%)
    May Industrial Production 2.8% m/m (expected 2.0%; last -0.9%).
    May Housing Starts -5.3% yr/yr (expected -6.1%; last 13.9%)
    Construction Orders 2.1% yr/yr (last 26.4%).

    South Korea
    May Industrial Production -1.2% m/m (expected 0.2%; last 2.4%); 3.5% yr/yr (expected 3.1%; last 6.2%).
    May Retail Sales -0.2% m/m (last -1.2%)
    May Service Sector Output -0.5% m/m (last 0.7%)

    May Private Sector Credit 0.4% m/m, as expected (last 0.5%) and Housing Credit 0.4% m/m (last 0.5%)


    S&P affirmed China’s A+ rating with a Stable outlook.


    Major European indices are looking for a mostly higher finish to the week.

    STOXX Europe 600: +0.3%,
    Germany’s DAX: +0.5%,
    U.K.’s FTSE 100: +0.5%,
    France’s CAC 40: -0.6%,
    Italy’s FTSE MIB: +0.1%,
    Spain’s IBEX 35: +0.1%.


    The U.K.’s Q1 GDP was revised slightly higher while flash June CPI readings from France and Spain showed another deceleration in the yr/yr inflation rate.

    The latest Consumer Expectations survey for the eurozone showed that year-ahead inflation expectations remained at 2.8% while the three-year outlook dipped to 2.3% from 2.4%.

    May Import Price Index 0.0% m/m (expected 0.2%; last 0.7%); -0.4% yr/yr (expected -0.3%; last -1.7%).
    June Unemployment Change 19,000 (expected 14,000; last 25,000)
    Unemployment Rate 6.0% (expected 5.9%; last 5.9%)

    Q1 GDP 0.7% qtr/qtr (expected 0.6%; last -0.3%); 0.3% yr/yr (expected 0.2%; last -0.2%).
    Q1 Current Account deficit GBP21.0 bln (expected deficit of GBP17.7 bln; last deficit of GBP21.2 bln)

    June CPI 0.1% m/m, as expected (last 0.0%); 2.1% yr/yr (last 2.3%).
    May PPI -1.4% m/m (last -3.6%); -6.7% yr/yr (last -6.7%).
    May Consumer Spending 1.5% m/m (expected 0.2%; last -0.9%)

    June CPI 0.1% m/m (expected 0.2%; last 0.2%); 0.8% yr/yr (expected 1.0%; last 0.8%).
    April Industrial Sales 0.8% m/m (last -2.8%); -2.0% yr/yr (last -5.1%).
    May non-EU trade surplus EUR5.77 bln (last surplus of EUR4.91 bln)

    June CPI 0.3% m/m (expected 0.2%; last 0.3%); 3.4% yr/yr, as expected (last 3.6%).
    June Core CPI 3.0% yr/yr (last 3.0%).
    April Current Account surplus EUR2.83 bln (last EUR3.29 bln)

    June KOF Leading Indicators 102.7 (expected 101.0; last 102.2).


    European Commission President von der Leyen was nominated for a second five-year term, as expected.

    The first round of French elections will take place this weekend with Marine Le Pen’s party expected to receive the largest share of the vote.


    Nike (NKE 80.02, -14.17, -15.0%): NIKE beats by $0.15, misses on revs, gross margin increased 110 bps, North America revenue decreased 1%; Expects FY25 reported revenue to be down mid single digits (reduced from initial outlook of positive growth)

    Kura Sushi (KRUS 74.10, -8.29, -10.1%): guides MayQ sales below consensus; lowers FY24 revenue guidance

    Accolade (ACCD 4.51, -1.88, -29.4%): beats by $0.13, beats on revs; guides Q2 revs below consensus; guides FY25 revs below consensus


    Apple (AAPL 216.15, +2.05, +1.0%): iPhone shipments in China increased 40% in May, according to Bloomberg

    Foot Locker (FL 24.26, -1.26, -4.9%): down on the heels of Nike’s disappointing sales outlook


    Infinera Corp (INFN 6.29, +1.03, +19.6%): Nokia confirms deal to acquire Infinera (INFN) for $6.65/share or an enterprise value of $2.3 bln; deal financed from Nokia’s cash on hand

    PTC Therapeutics (PTCT 30.00, -4.66, -13.4%): EMA recommended not renewing the conditional marketing authorization for Translarna – ataluren, a medicine for treating patients with non-sense mutation Duchenne muscular dystrophy


    There is much talk this morning about last night’s presidential debate.

    Politico reports that Democrats are actively considering replacing President Biden on the Democratic ticket after his debate performance.

    Stock futures indicate a modestly higher open, but things will be subject to change (for better or worse) following the 8:30 a.m. ET release of the May Personal Income and Spending Report, which contains the Fed’s preferred inflation gauges in the PCE Price Index and Core-PCE Price Index.

    The 2-yr note yield is unchanged at 4.72% and the 10-yr note yield is up one basis point to 4.30%.

    U.S. Dollar Index is down 0.1% to 105.93. The yen is little changed against the dollar but continues to trade near a 38-year low against the greenback with talk heating up about possible intervention from Japanese authorities.


    Russell will be completing the reconstitution of its indices today

    After the reconstitution is finished, the 10 biggest companies in the large-cap Russell 1000 index are expected to see their combined weighting rise to 34.3%, the highest in the 40-year history of FTSE Russell’s U.S. indexes, according to Catherine Yoshimoto, director of product management for the Russell US Indexes at FTSE Russell.

    This represents a gain of nearly 20 percentage points since the large-cap index first launched on Jan. 1, 1984, alongside its small-cap sibling, the Russell 2000 and their parent index, the Russell 3000

    It makes sense considering how much these stocks have appreciated over the past year. According to FTSE Russell, the combined market valuation of the largest stocks has grown by nearly 50% since last year’s reconstitution. At this point, it is no secret that the biggest stocks in the U.S. have driven much of the market’s gains during that time, with one stock in particular — Nvidia Corp. — accounting for a disproportionate percentage of the gains.

    But the U.S. market hasn’t always been as lopsided as it is today. Data in the tables below demonstrate how the weighting of the 10 largest U.S. firms in the index has increased over time. They also show how the individual companies at the top of the index have changed, too.

    There have been some notable shifts within the space. This year, Microsoft Corp. will return to its position as the top stock in the index, which it ceded to Apple Inc. back in 2021.

    Also, Nvidia has leapfrogged Inc., while chipmaker Broadcom Inc. has seen its ranking in the index skyrocket from 24th one year ago to 9th this year, making its debut in the top 10.

    As of earlier this week, technology would be on track to constitute 36.1% of the index after the annual reconstitution is official on Friday, according to data provided by FTSE Russell. This would represent its largest share in the history of the index, as well as a three-fold increase since the index launched. In early 1984, tech stocks constituted just 14.2% of the index, making tech the third-largest sector after consumer discretionary and energy.

    The growing dominance of megacap stocks is impacting the Russell indexes in other ways as well. A number of companies are being squeezed out of the growth index and reclassified as value to make room for the increased heft of the biggest stocks.

    Both the Russell Growth and Russell Value indexes will see an influx of newcomers, with 28 companies graduating to the Russell 1000 from the Russell 2000, including Super Micro Computer Inc. Microstrategy Inc. and Carvana IPOs and spinoffs will also see a handful of stocks join the large-cap index.

    To be sure, things look different for the Russell 2000, where healthcare stocks, not technology, will see the biggest increase in their weighting, largely due to a boom in biotechnology names in 2024.

    Of the 243 new additions to the Russell 2000 — a combination of demotions, IPOs and other new blood, and graduation from the micro-cap universe — 41 are classified as healthcare.

    Russell reconstitution day typically coincides with one of the most active trading sessions of the year as passive funds tracking the indexes rejigger their portfolios to match the indexes’ new weightings.

    Most of this frenetic activity is reserved for the Nasdaq and New York Stock Exchange’s closing auctions, according to FTSE Russell. During last year’s rebalance, roughly $134 billion in shares changed hands at the close.

    “Expect Friday to be one of the busiest days of the year,” said Jay Woods, chief global strategist at Freedom Capital Markets, in comments emailed to MarketWatch earlier this week.

    As of the end of 2023, roughly $10.5 trillion in passive money tracked the Russell’s U.S. indexes, according to FTSE Russell.

    While fund managers have had more than a month to prepare for the rebalance, it’s possible some of the bigger names in the index could be rocked by volatility, according to a team of market strategists at UBS Group led by Patrick Palfrey.

    In particular, Palfrey singled out many top value names, including JPMorgan Chase & Co. and Berkshire Hathaway, as potentially at risk for a rebalancing-related pullback.

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