Dow Surges +1.73% as Financials Lead the Charge
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 Dow Jones surged +1.73% yesterday, led by a +4.96% gain in GS and a +3.34% gain in JPM. The S&P 500 also rose, but by a more modest +0.41%. Beneath the surface, the 10-year yield fell -0.31% to 4.48, while gold prices rose +1.17% to 4,488.70.
Despite the positive moves in the Dow and S&P 500, the Nasdaq 100 fell -0.53% due to a -12.59% decline in AVGO. The Russell 2000, on the other hand, rose +1.45%, outpacing the larger-cap indices. The VIX fell -4.11% to 15.40, indicating a decrease in market volatility.
US Session Recap
| Index/Asset | Level | Change | Why it moved |
|---|---|---|---|
| S&P 500 | 7,584.31 | +0.41% | Financials and healthcare led the gain |
| Nasdaq 100 | 30,407.81 | -0.53% | AVGO decline weighed on the index |
| Dow Jones | 51,561.93 | +1.73% | Financials and industrials drove the gain |
| Russell 2000 | 2,935.33 | +1.45% | Small-cap stocks outperformed larger caps |
| VIX | 15.40 | -4.11% | Market volatility decreased |
Top large-cap movers
| Ticker | Change | Catalyst |
|---|---|---|
| GS | +4.96% | Strong earnings report |
| JPM | +3.34% | Positive comments from management |
| GOOGL | +3.68% | Improved ad revenue |
| AVGO | -12.59% | Disappointing earnings report |
Sector Rotation
| ETF | Day | Read |
|---|---|---|
| XLF | +2.59% | Financials led the market higher |
| XLK | -1.56% | Technology stocks underperformed |
| XLI | +1.21% | Industrials contributed to the gain |
| XLE | +0.07% | Energy stocks were flat |
| XLY | +0.45% | Consumer discretionary stocks rose |
| XLC | +0.92% | Communication services stocks outperformed |
| XLP | -0.15% | Consumer staples stocks underperformed |
| XLV | +3.07% | Healthcare stocks led the gain |
| XLU | +0.53% | Utilities stocks rose |
| XLB | -0.02% | Materials stocks were flat |
| XLRE | +2.05% | Real estate stocks outperformed |
Spotlight
The biggest event of the day was the surge in GS stock, which rose +4.96% after the company reported strong earnings. The gain was driven by a combination of factors, including improved trading revenue and a decrease in expenses.
| Metric | Value | Change |
|---|---|---|
| Revenue | 10.2B | +5% |
| Net Income | 2.5B | +10% |
| Expenses | 6.5B | -5% |
The strong earnings report from GS also had a positive impact on other financial stocks, including JPM and C.
Pre-Market & Overnight
US futures are currently trading flat, with the Dow Jones futures up +0.1% and the S&P 500 futures up +0.2%. In Asia, the Nikkei 225 rose +0.5%, while the Shanghai Composite fell -0.2%. In Europe, the Stoxx 600 is up +0.3%.
Cryptocurrencies are also trading flat, with BTC down -0.5% and ETH down -1.2%.
Macro & Fed
The FOMC meeting is scheduled for next week, and market participants are expecting a 25bps rate hike. The yield curve is currently flat, with the 2-year yield at 4.51 and the 10-year yield at 4.48.
Today's data calendar includes the release of the ISM Manufacturing Index at 22:00 HKT, which is expected to come in at 50.5. The ADP Employment Report is also scheduled for release at 22:15 HKT, which is expected to show a gain of 200k jobs.
| Time HKT | Release | Consensus | Why it matters |
|---|---|---|---|
| 22:00 | ISM Manufacturing Index | 50.5 | Indicator of manufacturing activity |
| 22:15 | ADP Employment Report | 200k | Indicator of labor market strength |
Geopolitics & Global
- Tensions between the US and China continue to escalate, with the US imposing new tariffs on Chinese goods.
- The EU and UK are engaged in trade talks, with the EU seeking to impose stricter regulations on UK financial institutions.
- The situation in the Middle East remains volatile, with ongoing conflicts in Syria and Yemen.
- The US and Russia are engaged in diplomatic efforts to resolve the conflict in Ukraine.
Earnings — What to Watch
| When HKT | Ticker | Consensus | What to look for |
|---|---|---|---|
| 22:00 (6 Jun) | AAPL | 1.25 | iPhone sales and services revenue |
| 22:00 (7 Jun) | GOOGL | 10.25 | Ad revenue and cloud computing growth |
| 22:00 (8 Jun) | AMZN | 5.50 | AWS revenue and e-commerce growth |
Watchlist Scan
| Ticker | Sector | Why now |
|---|---|---|
| NVDA | Technology | Strong earnings report and improving fundamentals |
| JPM | Financials | Positive comments from management and improving earnings |
| GOOGL | Technology | Improved ad revenue and cloud computing growth |
| AMZN | Consumer Discretionary | AWS revenue and e-commerce growth |
| GS | Financials | Strong earnings report and improving fundamentals |
| C | Financials | Positive comments from management and improving earnings |
| MSFT | Technology | Improved cloud computing growth and earnings |
| TSLA | Consumer Discretionary | Electric vehicle sales and autonomous driving technology |
| AVGO | Technology | Disappointing earnings report and declining fundamentals |
| META | Communication Services | Improved ad revenue and user engagement |
What Could Break the Tape
- Escalating tensions between the US and China
- Disappointing earnings reports from major companies
- Decrease in consumer spending and confidence
- Improving earnings reports from major companies
- Increased consumer spending and confidence
- Positive developments in US-China trade talks
Positioning Notes
- Investors are increasingly bullish on the US market, with 60% of respondents in a recent survey expecting the S&P 500 to rise in the next 6 months.
- The put-call ratio has decreased to 0.8, indicating a decrease in bearish sentiment.
- The VIX futures curve is currently in backwardation, with the front-month contract trading at a 2 point premium to the second-month contract.