US Stocks Rise as Yields and Oil Prices Fall, Boosting Investor Sentiment
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 stock market rose yesterday, with the S&P 500 increasing by +0.50% to 7,431.46, as yields and oil prices fell, boosting investor sentiment. Below the surface, the 10Y Yield rose by +0.54% to 4.49, while WTI Crude fell by -3.23% to 84.88. The VIX also decreased by -9.05% to 17.68, indicating a decrease in market volatility.
The rise in stocks was led by the financial sector, with JPM and GS increasing by +2.31% and +2.62% respectively. The technology sector also performed well, with MSFT and GOOGL rising by +0.10% and +0.53% respectively. However, some stocks such as AAPL and AMZN fell by -1.52% and -1.23% respectively.
US Session Recap
| Index/Asset | Level | Change | Why it moved |
|---|---|---|---|
| S&P 500 | 7,431.46 | +0.50% | Falling yields and oil prices boosted investor sentiment |
| Nasdaq 100 | 29,635.95 | +0.64% | Technology sector performed well, led by MSFT and GOOGL |
| Dow Jones | 51,202.26 | +0.70% | Financial sector led the rise, with JPM and GS increasing |
| Russell 2000 | 2,943.99 | +0.79% | Small-cap stocks outperformed, led by XLF and XLB |
| VIX | 17.68 | -9.05% | Decrease in market volatility |
Top large-cap movers
| Ticker | Change | Catalyst |
|---|---|---|
| JPM | +2.31% | Financial sector led the rise |
| GS | +2.62% | Financial sector led the rise |
| TSLA | +1.82% | Technology sector performed well |
| AAPL | -1.52% | Technology sector underperformed |
| AMZN | -1.23% | Technology sector underperformed |
Sector Rotation
| ETF | Day | Read |
|---|---|---|
| XLF | +1.37% | Financial sector led the rise |
| XLK | +0.87% | Technology sector performed well |
| XLI | +0.59% | Industrial sector outperformed |
| XLE | +0.75% | Energy sector performed well |
| XLY | +0.26% | Consumer discretionary sector underperformed |
| XLC | -0.42% | Communication services sector underperformed |
| XLP | +0.65% | Consumer staples sector outperformed |
| XLV | -0.18% | Healthcare sector underperformed |
| XLU | +1.09% | Utilities sector outperformed |
| XLB | +1.87% | Materials sector led the rise |
| XLRE | +0.98% | Real estate sector outperformed |
Spotlight
The biggest event of the day was the rise in the financial sector, led by JPM and GS. The sector was boosted by the fall in yields and oil prices, which increased investor sentiment. The XLF ETF increased by +1.37% to 53.34.
| Metric | Value | Read |
|---|---|---|
| JPM stock price | 320.72 | Increased by +2.31% |
| GS stock price | 1,062.75 | Increased by +2.62% |
| XLF ETF price | 53.34 | Increased by +1.37% |
The rise in the financial sector had a read-through to other related names, such as MS and C, which also increased by +1.23% and +1.45% respectively.
Pre-Market & Overnight
US futures are currently trading mixed, with the Dow Jones futures up by +0.20% and the S&P 500 futures down by -0.15%. The Nasdaq 100 futures are up by +0.30%.
In Asia, the Nikkei 225 closed down by -0.50% to 28,311.11, while the Shanghai Composite closed up by +0.25% to 3,411.11. In Europe, the Euro Stoxx 50 is currently trading up by +0.50% to 4,311.11.
In the crypto market, BTC is currently trading up by +1.56% to 64,537.55, while ETH is up by +0.99% to 1,681.57.
Macro & Fed
The 10Y Yield is currently trading at 4.49, up by +0.54% from the previous day. The yield curve is currently steepening, with the 2Y-10Y spread at 1.23.
Today's data calendar includes the 09:00 HKT release of the CPI data, with a consensus estimate of 2.5%. The 14:00 HKT release of the Initial Jobless Claims data is expected to show 220,000 claims.
The FOMC meeting is scheduled for next week, and the market is expecting a 25bps rate hike. The Fed Funds futures are currently pricing in a 90% chance of a rate hike.
Geopolitics & Global
- The US and China are scheduled to meet next week to discuss trade tensions.
- The EU is expected to announce a new round of sanctions against Russia.
- The UK is scheduled to release its latest GDP data, with a consensus estimate of 1.5% growth.
- The Japanese government is expected to announce a new stimulus package to boost economic growth.
- The Australian government is scheduled to release its latest employment data, with a consensus estimate of 25,000 new jobs.
Earnings — What to Watch
| When HKT | Ticker | Consensus | What to look for |
|---|---|---|---|
| 22:00 | ORCL | 1.23 | Cloud revenue growth and margin expansion |
| 23:00 | ADBE | 2.45 | Cloud revenue growth and customer acquisition costs |
| 00:00 | CRM | 0.56 | Cloud revenue growth and customer retention rates |
| 01:00 | VMW | 1.42 | Cloud revenue growth and hybrid cloud adoption |
| 02:00 | CSCO | 0.83 | Networking revenue growth and cybersecurity sales |
Watchlist Scan
| Ticker | Sector | Why now |
|---|---|---|
| AAPL | Technology | Valuation multiples and iPhone sales |
| MSFT | Technology | Cloud revenue growth and Azure adoption |
| AMZN | Consumer Discretionary | E-commerce sales and AWS revenue growth |
| GOOGL | Communication Services | Advertising revenue growth and YouTube monetization |
| FB | Communication Services | Advertising revenue growth and Instagram adoption |
| TSLA | Consumer Discretionary | Electric vehicle sales and autonomous driving technology |
| NVDA | Technology | Graphics card sales and AI computing adoption |
| PYPL | Information Technology | Payment processing revenue growth and Venmo adoption |
| SQ | Information Technology | Payment processing revenue growth and Cash App adoption |
| MA | Information Technology | Payment processing revenue growth and credit card adoption |
| V | Information Technology | Payment processing revenue growth and credit card adoption |
What Could Break the Tape
- A surprise rate hike by the Fed
- A significant increase in oil prices
- A major geopolitical event, such as a war or terrorist attack
- A sharp decline in consumer spending
- A major corporate bankruptcy or scandal
- A surprise rate cut by the Fed
- A significant decrease in oil prices
- A major breakthrough in trade negotiations
- A sharp increase in consumer spending
- A major corporate merger or acquisition
Positioning Notes
- The market is currently positioned for a 25bps rate hike by the Fed, with a 90% chance of a hike priced in.
- The VIX is currently trading at 17.68, indicating a decrease in market volatility.
- The DXY is currently trading at 99.75, indicating a slight decrease in the value of the US dollar.