Nvidia reels, dollar gains momentum

Market Update: Tech Recoil and Dollar Rally

In a dramatic turn, Nvidia, along with the Nasdaq and S&P500, experienced a sharp decline from their record highs on Thursday. As the half-year point approaches, global markets are assessing the potential for a robust 2024. Despite this reflection, the dollar continued its ascent.

U.S. Economic Activity and Stock Movements

U.S. economic data from May and June suggests a slowdown in activity. The trigger for the recent drop in mega-cap stocks remains unclear, especially with Atlanta Federal Reserve’s "GDPNow" still estimating a robust 3% growth for the quarter. The swift tech gains might have necessitated a pause, and investors may be preparing for a turbulent second half leading into the November U.S. elections. An anticipated presidential TV debate next Thursday could mark the start of this period.

On Thursday, Nvidia’s shares fell 3.5%, causing it to lose its brief status as the most valued company to Microsoft. The tech-heavy Nasdaq ended its seven-day streak of record highs, while other equities showed mixed results; the Dow Jones rose 0.7%, and the Russell 2000 remained unchanged.

Currency and Treasury Movements

Despite a dip in Treasury yields following lower-than-expected housing starts and jobless claims data, the dollar continued its upward trajectory. The greenback strengthened broadly against European, Japanese, and Chinese currencies. European central banks are considering rate cuts, and China faces increasing trade tensions and a worsening housing crisis.

This has led to significant outbound capital from China. About 33 billion yuan ($4.54 billion) exited the mainland this month via the Northbound leg of the Stock Connect Scheme, reversing four months of net inflows. Observers are eyeing next month’s Chinese Communist Party central committee plenum and upcoming G7 countries meetings.

Global Economic Insights

In the Euro zone, business growth slowed significantly in June, with demand falling for the first time since February. The services industry weakened, and the manufacturing downturn worsened. Japan reported a less than expected rise in consumer price inflation last month, excluding energy and fresh food, revealing a modest increase to 2.1%. Meanwhile, UK retail sales saw a strong rebound in May after a weather-impacted April.

Key Market Influences

The following events should shape U.S. markets through Friday:

U.S. Flash June business surveys from S&P Global and May existing home sales data San Francisco Federal Reserve President Mary Daly’s speech German Economy Minister Robert Habeck’s speech in Beijing ECOFIN meeting of European Union finance ministers in Luxembourg, with European Central Bank Vice President Luis de Guindos attending Corporate earnings reports from Carmax and Factset

Journalist Notes

The financial landscape remains volatile as markets navigate mixed economic signals and geopolitical pressures. Investors and analysts alike will be closely monitoring upcoming policy decisions and earnings reports to gauge future market directions.