Big Tech Wreck

Daily Market Comment

May 30, 2024

A volatile session ended with the major averages lower, pulled down by selling in big cap technology shares. Softer than expected economic data led to a dip in yields as the Initial Jobless Claims rose 3k to 219k, while Continuing Claims remained below 1.8 million. Moving rates was Q1 GDP being revised down to +1.3% from +1.6% previously. Core-PCE for Q1 came in at +3.6% vs. +3.7% estimated, but higher than +2% the prior quarter. April Pending Home Sales dropped -7.7% as higher mortgage rates cut into demand. The yield on the 10-year Treasury fell 7.4 basis points to 4.55% and the two-year T-Bill fell 5.8 basis points to 4.93%. New York Fed President John Williams helped moderate yields saying he expected inflation to cool in the second half of the year and that Fed policy was well-positioned to get inflation back to 2%. He also expects the economy to grow 2-2.5% this year and move into a better balance. Earnings were a hit and miss with foot Locker (FL), Pure Storage (PSTG), Best Buy (BBY) HP (HPQ) and (AI) surging after beating estimates, while Salesforce (CRM), Kohl's (KSS) and UiPath (PATH) were hammered after disappointing. Software giant and Dow component Salesforce (CRM) tumbled -19.74% on the day after weak guidance causing other software companies to sell off in sympathy with the IShares Expanded Tech-Software Sector ETF (IGV) sinking -5.61% and down for the year. Microsoft (MSFT) lost -3.38% and closed below its 50-day MA for the first-time since October, while AI chip-maker Nvidia (NVDA) dropped -3.77%. Despite the major averages closing near their lows, the broader market saw buying interest as investors looked ahead to the morning's core-PCE report, the Fed's preferred inflation gauge. Mostly due to the drop in salesforce, the DJIA closed down 330.06 points (-0.86%) at 38111.48. The S&P 500 lost 31.47 points (-0.60%) and settled at 5235.48, while the NASDAQ dropped 183.50 points (-1.08%) to 16737.08. The Russell 2000 and DJ Transportation Index both finished the day in the plus column.

Breadth was positive with advancing issues beating declining issues more than 3:1 on the NYSE and 1.4:1 on the NASDAQ. Advancing volume was 66% on the NYSE and 65% of the NASDAQ. The VIX rose 0.19 (+1.33%) and closed at 14.47. Crude oil prices fell 1.32 (-1.67%) and the July contract closed at $77.92 a barrel. Gold prices added 21.20 (+0.91%) and finished at $2362.80 an ounce. Bitcoin (BTC) closed the session at $68,400.

While selling in big cap tech stocks beat up the major averages, some investors were scooping up shares in the broader market as evidenced by positive underlying breadth. That's likely due to hopes that we'll see a small dip in tomorrow's core-PCE print on inflation. Currently analysts are looking for core-PCE to increase +0.3% on the month and +2.8% YoY. A softer number could trigger a relief in equities, while a higher print would likely feed fears that the Fed could tighten policy causing stocks to sell off. Of note is that today's lighter Q1 GDP revision brought the odds of a September rate cut back up to a coin toss. Look for another volatile session ahead of the weekend.

Earnings releases to watch for on Friday include: Genesco (GCO).

Friday's Market Moving Economic Calendar: Personal Income and Outlays (PCE) and Chicago PMI.

By David L. Blake, CMT

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Market Recap - 05/30/2024

Index Close Day Change Day % Change YTD % Change
NASDAQ COMPOSITE 16737.08 -183.5 -1.08% 11.5%
DJ UTILITIES 922.82 11.79 1.29% 4.67%
DJ TRANSPORT 14975.89 194.33 1.31% -5.81%
DJ INDUSTRIALS 38111.48 -330.06 -0.86% 1.12%
NYSE COMPOSITE 17852.36 57.47 0.32% 5.93%
S & P 100 INDEX 2505.29 -24.25 -0.96% 12.03%
RUSSELL 2000 2056.6 20.41 1% 1.46%
S&P 500 5235.48 -31.47 -0.6% 9.76%
CBOE MKT VOLATILITY 14.47 0.19 1.33% 16.22%
AMEX COMPOSITE 4948.91 50.65 1.03% 7.72%
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