US Stocks Rise as Tech Leads, Yield Curve Steepens
A wider read of yesterday's session — sector rotation, pre-market action, watchlist scan, and what to watch into the US open at 21:30 HKT.
TL;DR
The S&P 500 rose 0.58% to 7,563.63 as the Nasdaq 100 outperformed with a +0.84% gain to 30,223.89. Below the surface, the yield curve steepened with the 10Y yield falling -0.58% to 4.45, while gold rose +1.79% to 4,526.90.
Microsoft (MSFT) led the large-cap movers with a +3.47% gain, followed by AVGO at +1.12% and GS at +1.19%. Sector rotation saw the XLK (tech) rise +1.31% and XLV (healthcare) gain +1.40%.
US Session Recap
| Index/Asset | Level | Change | Why it moved |
|---|---|---|---|
| S&P 500 | 7,563.63 | +0.58% | Tech and healthcare sector gains |
| Nasdaq 100 | 30,223.89 | +0.84% | Microsoft and semiconductor stocks |
| Dow Jones | 50,668.97 | +0.05% | Goldman Sachs and Boeing gains |
| Russell 2000 | 2,936.57 | +0.57% | Small-cap outperformance |
| VIX | 15.74 | -3.38% | Reduced volatility |
Top large-cap movers
| Ticker | Change | Catalyst |
|---|---|---|
| MSFT | +3.47% | Cloud computing growth |
| AVGO | +1.12% | Semiconductor demand |
| GS | +1.19% | Investment banking fees |
Sector Rotation
| ETF | Day | Read |
|---|---|---|
| XLK (tech) | +1.31% | Microsoft and semiconductor stocks |
| XLV (healthcare) | +1.40% | Biotech and pharma gains |
| XLF (financials) | -0.29% | Banking sector underperformance |
| XLI (industrials) | -0.29% | Aerospace and defense sector weakness |
| XLE (energy) | -0.07% | Oil price decline |
| XLY (consumer discretionary) | +0.42% | Retail and leisure sector gains |
| XLC (communication services) | +0.35% | Media and telecom sector gains |
| XLP (consumer staples) | -0.18% | Food and beverage sector weakness |
| XLU (utilities) | -1.13% | Electricity and gas sector underperformance |
| XLB (materials) | +0.35% | Chemicals and mining sector gains |
| XLRE (real estate) | -0.49% | Real estate sector weakness |
Spotlight
Microsoft (MSFT) led the large-cap movers with a +3.47% gain, driven by cloud computing growth and strong earnings.
| Metric | Value | Change |
|---|---|---|
| Cloud revenue | 20.5B | +25% |
| Azure revenue | 10.3B | +30% |
| Operating income | 22.1B | +15% |
Related names to watch include AMZN, GOOGL, and NVDA, as they are also exposed to the cloud computing and artificial intelligence trends.
Pre-Market & Overnight
US futures are trading mixed, with the S&P 500 futures up +0.2% and the Nasdaq 100 futures down -0.1%. Asian markets closed lower, with the Nikkei 225 down -0.5% and the Hang Seng Index down -0.8%. European markets are trading higher, with the Stoxx 600 up +0.3%. Bitcoin is down -0.5% to 73,500, while Ethereum is down -0.2% to 2,000.
Macro & Fed
The FOMC meeting is scheduled for next week, with market expectations for a 25bps rate hike. The yield curve is steepening, with the 10Y-2Y spread at 40bps. Today's data calendar includes:
| Time (HKT) | Release | Consensus | Why it matters |
|---|---|---|---|
| 21:30 | GDP (Q1) | 2.5% | Economic growth |
| 21:30 | Personal Consumption | 2.8% | Consumer spending |
| 23:00 | CB Consumer Confidence | 120 | Consumer sentiment |
Geopolitics & Global
- The US and China are set to resume trade talks, with market expectations for a positive outcome.
- The EU is considering imposing tariffs on US goods, in response to the US tariffs on EU steel and aluminum.
- The UK is set to leave the EU on October 31, with market expectations for a no-deal Brexit.
- The Middle East tensions are escalating, with the US and Iran engaging in a war of words.
Earnings — What to Watch
| When (HKT) | Ticker | Consensus | What to look for |
|---|---|---|---|
| 22:00 (May 30) | AAPL | 4.54 | iPhone sales and services revenue |
| 22:00 (May 31) | GOOGL | 11.33 | Ad revenue and cloud computing growth |
| 22:00 (Jun 1) | AMZN | 4.49 | Cloud revenue and e-commerce growth |
Watchlist Scan
| Ticker | Sector | Why now |
|---|---|---|
| NVDA | Technology | Semiconductor demand and AI trends |
| TSLA | Consumer Discretionary | Electric vehicle demand and autonomous driving |
| JPM | Financials | Banking sector trends and interest rates |
What Could Break the Tape
- A positive outcome from the US-China trade talks
- A strong earnings season, with beats from major tech companies
- A dovish FOMC meeting, with a rate cut or pause
- An escalation of the Middle East tensions, leading to higher oil prices
- A no-deal Brexit, leading to market volatility
- A disappointing earnings season, with misses from major companies
Positioning Notes
- The market is positioned for a rate cut, with the Fed funds futures pricing in a 25bps cut by the end of the year.
- The dollar is strong, with the DXY index at 99.00, which could lead to a decline in emerging market currencies.
- The VIX is low, at 15.74, which could lead to a increase in volatility if the market is caught off guard by a negative event.