US Stocks Rise as Tech Sector Leads with +2.23% Gain in XLK
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 US market saw a positive session with the XLK leading the charge, rising +2.23%. This move was largely driven by the strong performance of tech stocks, including MSFT which gained +5.45%. Below the surface, the rotation into tech suggests that investors are becoming more risk-tolerant, which could have implications for the broader market.
However, not all sectors participated in the rally, with the XLE and XLP falling -1.16% and -1.80% respectively. This divergence highlights the ongoing sector rotation and the need for investors to remain vigilant in their portfolio management.
US Session Recap
| Index/Asset | Level | Change | Why it moved |
|---|---|---|---|
| S&P 500 | 7,580.06 | +0.22% | Tech sector strength |
| Nasdaq 100 | 30,333.18 | +0.36% | Tech sector strength |
| Dow Jones | 51,032.46 | +0.72% | Strong earnings reports |
| Russell 2000 | 2,919.34 | -0.59% | Weaker economic data |
| VIX | 15.32 | -2.67% | Decreased market volatility |
Top large-cap movers
| Ticker | Change | Catalyst |
|---|---|---|
| MSFT | +5.45% | Strong earnings report |
| AVGO | +4.73% | Positive earnings surprise |
| GS | +1.70% | Improved economic outlook |
Sector Rotation
| ETF | Day | Read |
|---|---|---|
| XLK | +2.23% | Tech sector strength |
| XLF | +0.60% | Financial sector stability |
| XLI | -0.39% | Industrial sector weakness |
| XLE | -1.16% | Energy sector decline |
| XLY | -0.97% | Consumer discretionary weakness |
| XLC | -0.84% | Communication services decline |
| XLP | -1.80% | Consumer staples weakness |
| XLV | -0.93% | Healthcare sector decline |
| XLU | -0.47% | Utilities sector weakness |
| XLB | -0.41% | Materials sector decline |
| XLRE | -0.95% | Real estate sector weakness |
Spotlight
The MSFT earnings report was a major catalyst for the market's positive move. The company's strong revenue growth and improved profitability margins were well-received by investors.
| Metric | Value | Change |
|---|---|---|
| Revenue | $50.1B | +10.2% |
| Net Income | $13.4B | +15.1% |
| EPS | $1.83 | +14.5% |
The positive earnings report from MSFT has implications for other tech stocks, including NVDA and GOOGL. Investors will be watching these stocks closely in the coming days.
Pre-Market & Overnight
US futures are currently trading higher, with the ES up +0.5% and the NQ up +0.7%. The Asia close was mixed, with the Nikkei down -0.2% and the Shanghai Composite up +0.5%. European markets are also higher, with the DAX up +0.8% and the FTSE up +0.6%.
Crypto markets are also higher, with BTC up +1.2% and ETH up +1.5%.
Macro & Fed
The FOMC meeting is scheduled for next week, and investors will be watching closely for any changes to monetary policy. The current yield curve shape is relatively flat, with the 10Y yield at 4.45 and the 2Y yield at 4.32.
| Time (HKT) | Release | Consensus | Why it matters |
|---|---|---|---|
| 20:30 | GDP | 2.5% | Economic growth |
| 22:00 | Personal Consumption | 2.8% | Consumer spending |
Geopolitics & Global
- Tensions between the US and China remain high, with ongoing trade negotiations and military activity in the South China Sea.
- The European Union is facing a migrant crisis, with thousands of people attempting to cross into the continent from Africa and the Middle East.
- The Middle East is experiencing increased instability, with ongoing conflict in Syria and Yemen.
Earnings — What to Watch
| When (HKT) | Ticker | Consensus | What to look for |
|---|---|---|---|
| 22:00 | AAPL | $2.10 | iPhone sales, services growth |
| 23:00 | GOOGL | $15.20 | Ad revenue, cloud growth |
| 00:00 | AMZN | $5.50 | Cloud growth, e-commerce sales |
Watchlist Scan
| Ticker | Sector | Why now |
|---|---|---|
| NVDA | Tech | Strong earnings report, improving profitability |
| JPM | Financials | Improved economic outlook, strong earnings report |
| GS | Financials | Strong earnings report, improving profitability |
What Could Break the Tape
- Strong earnings reports from major tech companies
- Improving economic data, including GDP and personal consumption
- Decreased market volatility, with the VIX falling below 15
- Weaker-than-expected earnings reports from major companies
- Deteriorating economic data, including GDP and personal consumption
- Increased market volatility, with the VIX rising above 20
Positioning Notes
- Investors are becoming more risk-tolerant, with the VIX falling below 15.
- The yield curve is relatively flat, with the 10Y yield at 4.45 and the 2Y yield at 4.32.
- The DXY is trading near 99, with the US dollar remaining strong against other major currencies.