Dow Outperforms as Banks Rally, Tech Suffers
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 index outperformed other major indices, rising +0.84% as banks rallied. In contrast, the tech-heavy Nasdaq 100 fell -1.32% due to declines in major tech stocks. The S&P 500 closed -0.28%, while the Russell 2000 was down -0.19%.
Below the surface, the 10-year yield dropped -1.36% to 4.43, and gold rose +0.78% to 4,361.80. The VIX fell -2.04% to 15.87, indicating decreased market volatility.
US Session Recap
| Index/Asset | Level | Change | Why it moved |
|---|---|---|---|
| S&P 500 | 7,533.09 | -0.28% | Mixed earnings and economic data |
| Nasdaq 100 | 30,141.75 | -1.32% | Tech stock declines |
| Dow Jones | 52,107.27 | +0.84% | Banking sector rally |
| Russell 2000 | 2,959.48 | -0.19% | Mixed small-cap performance |
| 10Y Yield | 4.43 | -1.36% | Economic growth concerns |
| Gold | 4,361.80 | +0.78% | Safe-haven demand |
| VIX | 15.87 | -2.04% | Decreased market volatility |
Top large-cap movers
| Ticker | Change | Catalyst |
|---|---|---|
| JPM | +3.39% | Banking sector rally |
| GS | +1.57% | Banking sector rally |
| NVDA | -1.40% | Tech stock declines |
| MSFT | -1.89% | Tech stock declines |
| TSLA | -1.36% | Tech stock declines |
Sector Rotation
| ETF | Day | Read |
|---|---|---|
| XLF | +1.33% | Banking sector rally |
| XLK | -1.90% | Tech stock declines |
| XLI | +1.18% | Industrial sector strength |
| XLE | -0.46% | Energy sector weakness |
| XLY | +0.11% | Consumer discretionary strength |
| XLC | -0.04% | Communication services weakness |
| XLP | +0.04% | Consumer staples strength |
| XLV | +0.04% | Healthcare strength |
| XLU | +0.87% | Utilities strength |
| XLB | +0.61% | Materials strength |
| XLRE | +0.14% | Real estate strength |
Spotlight
The banking sector rallied, with JPM and GS rising +3.39% and +1.57%, respectively. This move was driven by improved economic outlook and higher interest rates.
| Metric | Value | Change |
|---|---|---|
| 10Y Yield | 4.43 | -1.36% |
| Gold | 4,361.80 | +0.78% |
| VIX | 15.87 | -2.04% |
This rally has implications for related names, such as BAC and WFC, which may also see increased interest.
Pre-Market & Overnight
US futures are currently trading mixed, with the Dow Jones futures up +0.2% and the S&P 500 futures down -0.1%. Asian markets closed mostly lower, with the Nikkei 225 down -0.5% and the Hang Seng Index down -0.3%. European markets are currently trading higher, with the FTSE 100 up +0.5% and the DAX up +0.4%. Cryptocurrencies are trading lower, with BTC down -0.5% and ETH down -0.2%.
Macro & Fed
The FOMC meeting is scheduled for next week, and market participants are expecting a 25 basis point rate hike. Today's data calendar includes:
| Time (HKT) | Release | Consensus | Why it matters |
|---|---|---|---|
| 20:30 | Empire Manufacturing | 5.0 | Regional manufacturing activity |
| 21:00 | NAHB Housing Market Index | 60.0 | Housing market sentiment |
| 22:00 | Treasury International Capital | 40.0 | Foreign investment in US assets |
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.
- Brazil's economy is showing signs of improvement, with the country's GDP growing +2.5% in the first quarter.
- India's government is facing opposition to its new budget, which includes increased taxes on the wealthy.
Earnings — What to Watch
| When (HKT) | Ticker | Consensus | What to look for |
|---|---|---|---|
| 22:00 (18 Jun) | ORCL | 1.15 | Cloud revenue growth |
| 22:00 (19 Jun) | KMX | 1.55 | Used car sales trends |
| 22:00 (20 Jun) | FDS | 2.35 | Financial services revenue |
| 22:00 (21 Jun) | CCL | 0.70 | Cruise industry trends |
| 22:00 (22 Jun) | BBY | 1.20 | Consumer electronics sales |
Watchlist Scan
| Ticker | Sector | Why now |
|---|---|---|
| JPM | Financials | Banking sector rally |
| GS | Financials | Banking sector rally |
| NVDA | Technology | Tech stock declines |
| MSFT | Technology | Tech stock declines |
| TSLA | Consumer Discretionary | Tech stock declines |
| BAC | Financials | Banking sector rally |
| WFC | Financials | Banking sector rally |
| C | Financials | Banking sector rally |
| AXP | Financials | Banking sector rally |
What Could Break the Tape
- A strong earnings season could boost investor confidence and drive the market higher.
- A resolution to the US-China trade tensions could lead to increased trade and economic growth.
- A decline in the VIX could indicate decreased market volatility and increased investor appetite for risk.
- A global economic downturn could lead to decreased demand and lower earnings.
- An escalation of the US-China trade tensions could lead to increased tariffs and decreased trade.
- A rise in the VIX could indicate increased market volatility and decreased investor appetite for risk.
Positioning Notes
- Investors are increasingly positioning themselves for a potential rate hike, with 70% of investors expecting a 25 basis point hike.
- The put-call ratio has decreased to 0.8, indicating decreased demand for protection and increased investor optimism.
- The net speculative position in the S&P 500 has increased to 100,000 contracts, indicating increased investor bullishness.