Market Insights: Gonet’s July 12 News Update


Dow +0,93%, S&P 500 +0,67%, Nasdaq +0,55%, Russell 2000 +0,96%, SOX +0,05%, Eurostoxx +0,71%, SMI +0,37%.

Wall Street continues its march towards the sky, which takes the opportunity to fall on our heads.

The merry kingdom of equities is once again watching the yield of the US 10-year bond very closely. This may seem simplistic, but with stock market operators you should not look for Jesuit explanations either, it’s still the world of the stock market, with all that that implies… Ok, I’ll stop there. So yesterday the 10-year fell back and went back below 4%, a nice breath of fresh air for the players in the equity market, who felt like they were growing wings, especially since this afternoon the long-awaited price index at consumption will be released in the USA. And in the trading rooms the hope is growing that this damn inflation will finally bring it to its knees. Economists expect prices to rise 3.1% in June, on an annual basis, the previous month the rise was 4%. 3.1% is no longer so far from the 2% target to which the Fed clings like Harpagon to its cassette. That said, the Federal Reserve tends to favor the heart number, which takes neither energy nor food into account. In this case the expectation is 5%. Anyway, my little finger tells me that if today’s figure comes out below forecast, the market will reallocate funds to so-called risky assets.

It is in this state of mind that the main indices ended their day yesterday close to their highest of the session. Small and mid caps (Russell 2000 – RTY) are outperforming their big brothers, the positive atmosphere around growth / inflation is felt, in trading volumes worthy of the finest acoustic concerts. The SPX Equal Weight ETF rose 1.1%, while the stock market behemoths still underperformed, the Mega Cap Growth ETF only gained 0.4%. The shorts are feeling the tide and are covering themselves a little more, the most short-selling stocks on the stock exchange have now risen by 11.5% since last Thursday (ADP report). The internal market indicators are rather good, 3 titles close up on the NYSE against 1 down, 10 of the 11 sectors of the SPX progress during the session, only pharmas end in balance, a sign of a pronounced appetite for the risk yesterday. The industrial sector is driven by 3M (MMM +4.9%), which benefits from a positive rating from Bank of America. On the financials side, JP Morgan gained 1.6% after Jefferies raised it to “Buy”. American Express (AXP +1.7%) also supports the sector, Bank of America adds the title to its “top picks” list.

The market is clearly keen to see the glass half full, it wants to hear this afternoon that inflation is decelerating. Since the 1950s, spikes in inflation have typically been followed by double-digit gains for equities, with the SPX gaining around 15% since peaking in the CPI last year. It seems that Wall Street’s flagship index has entered its money time. Note that the VIX fell 1.5% to 14.84 yesterday, a very low level, while the MOVE (its bond counterpart) lost 3.5% to 127.07. This morning the Fed Funds are predicting an 89% chance of a 25 basis point hike by the Fed on July 26. The first rate cut is seriously considered by the market on June 12, 2024.

Oil continues to recover, the barrel of WTI Light Crude rises to 74.70 dollars, it benefits from the weakening of the dollar but also from speculation that Russia will join Saudi Arabia in the effort to reduce the offer. The greenback is therefore retreating, the EUR/USD pair is trading this morning at 1.1024, go figure… Gold is trying to take advantage of this and is rising slightly, to 1934 dollars per ounce.

Chinese hackers have broken into email accounts linked to government agencies in Western Europe, Microsoft announces. The group, Storm-0558, managed to go unnoticed for a month after accessing the email data of around 25 organizations in mid-May.

Joe Biden will meet Volodymyr Zelenskiy and address the NATO summit in Vilnius today. The Alliance has pledged to speed up Ukraine’s application for membership “when the allies agree and the conditions are met”. The G7 countries will begin discussions with Kyiv on bilateral security commitments. Mr Zelenskiy criticizes the alliance for not setting a clear timetable for NATO membership.

On the macro-economic menu of the day, the main course of the week therefore with the American consumer price index which will be published at 2:30 p.m.

Microsoft wins litigation in the United States against the FTC in the Activision case. ASML plans to cut hiring this year due to a short-term downturn in the chip industry, reports Bloomberg. Nvidia negotiates a place in the capital of ARM, in the cadre of the IPO orchestrated by Softbank, according to the FT. Broadcom’s acquisition of VMware for $69 billion is expected to be cleared by the EU. Siemens and Engie Vianeo deploy electric vehicle chargers in France.

Tonight and this morning in Asia, the indices are trading in scattered order. Tokyo seems to have lost its mojo and is down 0.81% at the bell, Hong Kong is up 0.78%, Shanghai is down 0.85% and Seoul is up 0.48%. The SPX future trades at breakeven and Europe opens up 0.4%.

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