BentinPartner Weekly
Tech stocks managed to close unchanged last week with a last-minute squeeze on Friday but some of the large cap tech names were left severely bruised such as Salesforce (CRM) which took its hardest hit in 20 years after shedding -19% on the Thursday on a “revenue” miss and lower guidance for Q2. Other tech names such as Dell suffered a similar fate last week despite matching earnings as it guided the whole year lower. HP posted an eighth consecutive decline in sales which only confirmed earlier signs of consumer weakness (now shifting towards capex).
Nvidia on Thursday also dropped -3.8% on a report that the US was slowing the number of licenses for chip exports to the Middle East (only adding to restrictions imposed on exports to China). Some of the Mag7, Microsoft and AMZN, also suffered losses for the week of about -2.5% with large European software companies (SAP) also taking a hit.
While over the preceding week, we heard plenty of talks about weaker consumer data, last week crystalized those concerns with Q1 GDP being revised lower from a first estimate (to 1.3% from 1.6% and in sharp contrast with the 3.3% reported in Q4 2023) on weaker consumer and capex spending.
Pending home sales dropped significantly in April (-8.7%) while a tamer PCE which rose by only 0.2% in April, softened the blow from the tech earnings disappointment by reviving Fed rate accommodation by the Federal Reserve.
Stocks bounced in a late “hockey stick” fashion on Friday but a correction was long overdue and somehow, we would not be surprised (although Asia is quite strong this morning and Europe likely to receive some support from this week’s pre-announced rate cut), if some profit taking would return to erode some last month’s solid equity markets gains, especially in a context of heightened geopolitical tensions (that the market keeps ignoring), weaker tech earnings and rampant speculation.
On the geopolitical side, J. Biden pressured Israel to end the war in a speech on Friday, outlining the terms of a peace proposal against which Israel pushed back over the week end.
On the war front, Western nations proceeded with a major esclatation, agreeing their equipment to be used to strike inside Russia, and more significantly, perhaps implying a breach of provisions of the Russian nuclear doctrine, after two Russian early nuclear detection systems (out of 10 that they own, it seems) were struck, fuelling speculation of why it was done and what it means in terms of war escalation. Western politicians have obviously no problem bridging a posture of celebration for the “debarquement” in Normandy that was instrumental in ending WWII with crossing red lines that are increasing the risks of a more direct (possibly ultimately nuclear) confrontation with Russia. Europe is going to the polls next week to renew their local and European parliament.
The US said it will coordinate with allies to punish Chinese firms that are helping Russia bolster its military-industrial base, including potential sanctions against financial institutions, US officials said on Friday. Earlier that day US Deputy Treasury Secretary W. Adeyemo had urged German business leaders during a speech in Berlin, to tell their Chinese counterparts that they face a choice between doing business in Europe or working to equip Russia’s military.
Elsewhere, in a Bloomberg editorial, M. Bloomberg said “that there is enormous potential demand for carbon credits. Many business leaders recognize that the costs of inaction are enormous — and that tackling climate change is in their companies’ self-interest — and so they are setting ambitious decarbonization goals. That is not altruism. It’s capitalism.
For markets to work well, they must be transparent, trusted and standardized — three qualities that have largely eluded the market for carbon credits. But change is coming.”, he said
This editorial was in response to the government push last week towards voluntary carbon initiatives with a policy statement setting principles for building more transparent, responsible and effective voluntary carbon markets. We know of one such initiative carried out from Basel by Hyphen Earth which is well worth looking into.
Economic activity data are due in Europe this week ahead of the ECB’s rate decision, and the US jobs report will be released on Friday.
Over the past week, the S&P500 gained 0,3% (11,0% YTD) while the Nasdaq100 dropped -0,7% (10,1% YTD). The US small cap index gained 1,3% (2,5% YTD). AAPL rallied 2,9% (-0,1%).
The Equally Weighed SP500 gained 0,6% (5,1% YTD), outperforming the S&P500 by 0,3%. The median SP500 YTD return closed the week at 3,1%.
Cboe Volatility Index gained 1,2% (3,8% YTD) to 12,92.
The Eurostoxx50 dropped -1,1% (12,8%), underperforming the S&P500 by-1,3%.
Diversified EM equities (VWO) sold off by -2,2% (4,8%), underperforming the S&P500 by-2,5%.
The Dollar DXY Index (UUP) measuring the USD performance vs. other G7 currencies dropped -0,3% (5,8%) while the MSCI EM currency index (measuring the performance of EM currencies vs. the USD) dropped -0,6% (-0,9%).
10Y US Treasuries dropped 2bps (61bps) to 4,49%. 10Y Bunds climbed 8bps (64bps) to 2,66%. 10Y Italian BTPs underperformed rising 9bps (28bps) to 3,98%, underperforming Bunds by 1bps.
US High Yield (HY) Average Spread over Treasuries climbed 8bps (-15bps) to 3,08%. US Investment Grade Average OAS dropped -2bps (-12bps) to 0,93%.
In European credit markets, EUR 5Y Senior Financial Spread climbed 0bps (-9bps) to 0,59%.
Gold dropped -1,1% (12,7%) while Silver shed -4,2% (27,4%). Major Gold Mines (GDX) gained 1,6% (13,8%).
Goldman Sachs Commodity Index dropped -0,4% (5,6%). WTI Crude dropped -1,2% (7,2%).
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