'Markets Wrap: Nvidia Up 5%, 'Magnificent Seven' Lead Gains'

Tech Rally Lifts Stocks Amid Economic Concerns

A surge in major technology companies pushed stocks higher, despite weak economic data. Nvidia Corp led gains among the "Magnificent Seven" megacaps, rebounding after a $430 billion loss and a three-day correction. The S&P 500 rose 0.3%, while the Nasdaq 100 increased by 1%. In anticipation of a $69 billion two-year Treasury auction, Treasury yields saw minor changes.

U.S. consumer confidence declined, with concerns over business conditions, the job market, and incomes. Meanwhile, home-price gains slowed as potential buyers were deterred by higher mortgage rates. Fed Governor Michelle Bowman highlighted upside risks to inflation and the need for sustained high borrowing costs. Chris Zaccarelli of Independent Advisor Alliance noted that the bull market is unlikely to be derailed unless either a recession occurs or the Fed changes its interest-rate policy.

Market Movements and Economic Indicators

The S&P 500 surpassed 5,460, with a notable 5% increase in Nvidia shares. Carnival Corp. also experienced a surge. A fledgling rally in transportation stocks faces a critical test with FedEx Corp.’s upcoming results. Treasury 10-year yields rose by one basis point to 4.25%. Bitcoin hovered near $62,000, while the Canadian dollar fluctuated due to unexpected inflation spikes.

According to analysts, Nvidia's recent selloff does not indicate a declining outlook for tech or the broader market, with positive demand signals remaining strong. UBS and Neuberger Berman Group's experts suggest the correction should not be misconstrued as a signal of broader market weakness.

Investor Behavior and Sector Trends

Last week saw a net selling of U.S. equities by Bank of America Corp. clients, driven by hedge funds and institutions, while retail investors continued buying. Technology and communications services sectors attracted most inflows, whereas financials suffered the biggest outflows. Generally, investor preferences leaned towards U.S. equities over European counterparts.

Commodity Trading Advisors (CTAs) are predicted to offload more equities this week, regardless of market conditions, according to Goldman Sachs Group Inc. Even in a rising market, an estimated $3 billion in stocks could be sold.

Corporate Developments

Exxon Mobil Corp. initiated steps for a seventh oil project in Guyana, signaling plans to boost crude output. Boeing Co. proposed purchasing Spirit AeroSystems Holdings Inc. for about $35 per share, mainly through stock. Airbus SE is struggling with a shortage of parts for its aircraft production. Microsoft Corp. faces a potential EU fine for market power abuse related to its Teams app. OpenAI is tightening restrictions on China's access to its AI software. AbbVie Inc. failed to secure approval for a new Parkinson's drug due to issues at a manufacturing facility.

Key Events to Watch

This week's key events include U.S. new home sales data, China's industrial profits, Eurozone economic confidence, and U.S. durable goods orders. Additional highlights include Nike's earnings and Japan's Tokyo CPI data. Federal Reserve's Thomas Barkin will also deliver remarks.

Market Summary

As of 11:41 a.m. New York time:

Stocks

The S&P 500 rose 0.3%, the Nasdaq 100 gained 1%, and the Dow Jones Industrial Average fell 0.7%. The Stoxx Europe 600 dropped 0.2%, whereas the MSCI World Index increased by 0.2%.

Currencies

The Bloomberg Dollar Spot Index was up 0.2%. The euro decreased by 0.2% to $1.0709, the British pound remained stable at $1.2678, and the Japanese yen stayed unchanged at 159.70 per dollar.

Cryptocurrencies

Bitcoin rose 3.9% to $61,807.07, and Ether climbed 3.1% to $3,412.2.

Bonds

10-year Treasury yields increased by one basis point to 4.25%, Germany’s 10-year yield remained steady at 2.41%, and Britain’s 10-year yield fell by one basis point to 4.07%.

Commodities

West Texas Intermediate crude decreased by 0.3% to $81.35 a barrel, and spot gold fell by 0.6% to $2,320.20 an ounce.