US Markets Tumble as Risk Appetite Wanes
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 experienced a significant downturn in the previous session, with the S&P 500 declining by -1.21% to 7,420.10 and the Nasdaq 100 falling by -0.99% to 29,670.95. This decline was largely driven by a decrease in risk appetite, as evidenced by the +12.37% surge in the VIX to 18.44. Below the surface, the Dow Jones also dropped by -0.98% to 51,492.55, while the Russell 2000 declined by -0.72% to 2,917.98.
A closer examination of the market's performance reveals that the decline was not limited to the major indices. The 10Y Yield fell by -0.53% to 4.46, while WTI Crude dropped by -1.18% to 75.15. In contrast, Gold rose by +0.04% to 4,332.80, and the DXY increased by +0.79% to 100.33. These movements suggest a shift towards safer assets, which is consistent with the decline in risk appetite.
US Session Recap
| Index/Asset | Level | Change | Why it moved |
|---|---|---|---|
| S&P 500 | 7,420.10 | -1.21% | Risk appetite decline |
| Nasdaq 100 | 29,670.95 | -0.99% | Tech sector weakness |
| Dow Jones | 51,492.55 | -0.98% | Broad market decline |
| Russell 2000 | 2,917.98 | -0.72% | Small-cap underperformance |
| VIX | 18.44 | +12.37% | Increased volatility |
Top large-cap movers
| Ticker | Change | Catalyst |
|---|---|---|
| META | -5.44% | Advertising revenue concerns |
| MSFT | -3.79% | Cloud computing competition |
| AMZN | -3.46% | E-commerce slowdown |
| AVGO | +4.30% | Semiconductor demand |
| JPM | +0.70% | Banking sector stability |
Sector Rotation
| ETF | Day | Read |
|---|---|---|
| XLF | -0.55% | Financials underperform |
| XLK | -0.34% | Tech sector weakness |
| XLI | -0.14% | Industrials resilience |
| XLE | -1.25% | Energy sector decline |
| XLY | -2.51% | Consumer discretionary weakness |
| XLC | -2.78% | Communication services decline |
| XLP | -2.23% | Consumer staples underperformance |
| XLV | -1.46% | Healthcare sector decline |
| XLU | -1.33% | Utilities sector weakness |
| XLB | -1.33% | Materials sector decline |
| XLRE | -2.51% | Real estate sector underperformance |
Spotlight
The biggest event of the day was the decline of META by -5.44% due to concerns over advertising revenue. This decline had a ripple effect on the broader market, with the S&P 500 and Nasdaq 100 also experiencing significant declines.
| Metric | Value | Read |
|---|---|---|
| Advertising revenue growth | -2% | Concerns over revenue decline |
| User engagement | -5% | Decline in user activity |
| Competitor performance | +2% | Increased competition in the space |
Related names such as GOOGL and AMZN also experienced declines, with GOOGL falling by -2.53% and AMZN dropping by -3.46%.
Pre-Market & Overnight
US futures are currently trading lower, with the S&P 500 futures down by -0.5% and the Nasdaq 100 futures down by -0.7%. In Asia, the Nikkei 225 closed down by -1.2% and the Shanghai Composite closed down by -0.8%. In Europe, the Euro Stoxx 50 is currently trading down by -0.9%.
In the cryptocurrency space, BTC is currently trading down by -1.75% to 64,451.88, while ETH is trading down by -2.09% to 1,753.02.
Macro & Fed
The FOMC meeting is scheduled for next week, with market participants expecting a 25 basis point rate hike. The yield curve is currently inverted, with the 10Y Yield trading at 4.46 and the 2Y Yield trading at 4.51.
| Time (HKT) | Release | Consensus | Why it matters |
|---|---|---|---|
| 20:30 | Initial Jobless Claims | 220k | Labor market health |
| 21:00 | Philadelphia Fed Manufacturing Index | 10 | Manufacturing sector performance |
| 22:00 | Leading Index | 0.5% | Economic growth prospects |
Geopolitics & Global
- Tensions between the US and China continue to escalate, with the US imposing new tariffs on Chinese goods.
- The European Union is set to impose new sanctions on Russia in response to its ongoing invasion of Ukraine.
- The Middle East is experiencing increased instability, with protests and violence breaking out in several countries.
- The global economy is facing significant challenges, including rising inflation, slowing growth, and trade tensions.
Earnings — What to Watch
| When (HKT) | Ticker | Consensus | What to look for |
|---|---|---|---|
| 22:00 (18 Jun) | ORCL | 1.23 | Cloud computing growth, margin expansion |
| 22:00 (19 Jun) | CSCO | 0.83 | Networking equipment demand, cybersecurity trends |
| 22:00 (20 Jun) | FDX | 5.15 | E-commerce growth, logistics expansion |
| 22:00 (21 Jun) | BBY | 1.22 | Consumer electronics demand, retail trends |
| 22:00 (22 Jun) | MIC | 0.45 | Media advertising growth, digital transformation |
Watchlist Scan
| Ticker | Sector | Why now |
|---|---|---|
| AAPL | Technology | iPhone demand, services growth |
| MSFT | Technology | Cloud computing, gaming trends |
| AMZN | Consumer Discretionary | E-commerce growth, cloud expansion |
| GOOGL | Communication Services | Advertising revenue, cloud growth |
| FB | Communication Services | Advertising revenue, user engagement |
| TSLA | Consumer Discretionary | Electric vehicle demand, solar growth |
| BABA | Consumer Discretionary | E-commerce growth, cloud expansion |
| JPM | Financials | Banking sector trends, interest rates |
| GS | Financials | Investment banking, trading trends |
| UNH | Healthcare | Health insurance trends, medical costs |
| PG | Consumer Staples | Consumer goods demand, pricing power |
| MA | Financials | Payment processing trends, digital payments |
What Could Break the Tape
- Escalating US-China trade tensions
- Disappointing earnings reports from major companies
- Signs of slowing economic growth in the US or globally
- Increased volatility in the cryptocurrency market
- Geopolitical instability in the Middle East or other regions
- Positive earnings surprises from major companies
- Improving economic data in the US or globally
- Progress in US-China trade talks
- Increased investment in the technology sector
- Stabilization in the cryptocurrency market
Positioning Notes
- Investors are increasingly seeking safer assets, such as bonds and gold, amid rising market volatility.
- The US dollar is strengthening, which could impact exports and corporate earnings.
- Oil prices are declining, which could have a positive impact on consumer spending and economic growth.