Tech-Heavy: Can Wall Street’s bulls bank on The Magnificent Seven?

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Last week a euphoric S&P 500 index crashed headlong into its own 14-month high.

Friday was a minor come down, but as The Fed might’ve put it, that losing session was more of a pause than a reset.

After six straight days of technology-led Nasdaq and S&P 500 index gains, Wall Street closed out the week with a loss. All three of the US major indices went negative, as if to just confirm that was still possible.

The bulls took the wheel last week, as the widely anticipated yet near-mythic pause in interest rates came to fruition, the Federal Reserve and the easily swayed market were both buoyed by inflation data that, when looked at from a certain angle, suggests some slight amelioration in the pace of rising prices.

The next Fed meeting is a far way off… (July 25-26, I reckon) and Wall St traders are looking comfortable predicting what the central bank will do, betting that it’ll raise rates following the ‘pause’.

The Fed had raised interest rates at 10 straight meetings since March 2022. Its goal has been to slow the economy to cool inflation but not so much that it causes a recession.

On Friday the Dow Jones Industrial Average lost more than 100 points, or 0.32%. The S&P 500 gave up 16 points, or 0.37%, with 8 of 11 S&P sectors in negative territory, led by Technology.

The tech-heavy Nasdaq Composite closed 93 points, or nearly 0.7%, down.

After making money during a cracking week, it’s unsurprising a few traders cashed in for a weekend of fancy parties and spending.

It’s now been five straight weeks of wins for both the Dow Jones and the top 500 index.

Over in tech-heavy town, the Nasdaq has now been fiercely positive for eight weeks of back to back gains.

Even Friday’s step back followed a determined Thursday rally. For the week, the blue-chip Dow rose 1.25%, the S&P 500 gained 2.6%. and the Nasdaq gained 3.25%, both driven by Top Techonomics.

US markets are closed on Monday for Juneteenth, and the only question that needs confronting when trading re-opens on Tuesday morning New York time: How much further can the freight train carry newly crowned megatech Nvidia (NVDA), and old hands like Microsoft (MSFT), Apple (AAPL) and Meta (META)?

And now we can add a very familiar stock to that block party.

Tesla (TSLA) has jumped out of its skin for 14 of the last 15 sessions. Even Netflix (NFLX) and a few other seriously big tech names are nudging multiple 52-week highs.

The Magnificent 7 – seven mega-cap stocks in Nvidia, whose market value topped $1 trillion, Apple, Microsoft, Amazon, Meta (Facebook), Alphabet (Google) and Tesla – have been the main driver behind the market’s recent strength and its shift from bear to bull market.

But meanwhile, over half of the US stock market companies are still down for the year.

The question here for traders must be valuation. With each push higher, the buying opportunity gets harder to justify.

Bitcoin meantime, amid a cavalcade of bad blockchain behaviour, rallied on Friday to end the week strongly following the surprise move by BlackRock to file for a spot Bitcoin ETF after the bell on Thursday

The move provided the battered crypto industry a hit of confidence  during some unhappy impacts led by the US Securites watchdog (SEC).

Wall Street will pause on Monday to mark Juneteenth, which became a federally recognised holiday in 2021.

And there will be no trading in stocks as US equity markets will be closed.

The US bond market is also closed, so no trading in Treasuries.

Stock futures will trade on an abbreviated schedule, until 1pm NYT.

The week ahead

Federal Reserve Chairman Jerome Powell will be in the spotlight next week with appearances on Capitol Hill in front of the House Financial Services Committee and the Senate Banking Committee. Powell’s testimony will supplement the release of the Fed’s semi-annual monetary policy report.

Investors will also be watching to see if the momentum rallies for highly-shorted stocks can extend.

Hedge funds betting against US tech stocks have been carted to all parts of the ground in a run that really began after Meta’s surprise earnings fuelled a sharp rebound which has only gathered momentum.

Traders betting against Nvidia lost $2.2 billion in late May when the chipmaker stormed in some corker earnings and forward guidance, according to the financial data firm S3 Partners.

Over the last week, the list of stocks with more than 20% short interest of total float that showed big rallies included Nikola (NKLA), EHang (EH), Carvana (CVNA), Workhorse Group (WKHS), Hyzon Motors (HYZN), Cipher Mining (NASDAQ:CIFR), (AI), Virgin Galactic (NYSE:SPCE), Zentalis Pharmaceuticals (NASDAQ:ZNTL), and Upstart (UPST).

The pick of US Earnings

June 20 – 23

Sigma Lithium Corp. (SGML)

FedEx (FDX), La-Z-Boy (LZB)

Wall Street expects FedEx to earn US$4.90 per share on revenue of US$22.77 billion vs this time last year when earnings came to US$6.87  on revenue of $24.39 billion.

FDX stock has jumped 36% YTD, more than doubling the 15% improvement in the S&P 500 index.

At US$234, the stock is not cheap and has added more than 16% since the company’s last earnings results.

FDX is up almost 75% after its most recent low in September 2022 when it was a bargain at US$140 last September.

Management’s been on a cost-cutting binge, including consolidating all its bits and pieces into a single deliverer to take on spunkier rivals  United Parcel Service (UPS) and Amazon (AMZN).

“We will be leaner, more agile and better positioned to execute on our mission to help customers compete and win with the world’s smartest logistics network,”  CEO Raj Subramaniam told investors.

KB Home (KBH), Winnebago (WGO), Steelcase (SCS)

Accenture (ACN), FactSet Research (FDS)

Wall Street expects Accenture to earn US$3.04 per share on revenue of US$16.56 billion vs the year-ago quarter when earnings came to US$2.79 per share on revenue of US$16.16 billion.

The US economic calendar

US markets closed for holiday (Juneteenth)
NAHB Housing Market Index (June)

Housing Starts (May)
Building Permits (May)

Fed Chair Powell testifies to House panel

Fed Chair Powell testifies before the US Senate
Chicago Fed National Activity Index (May)

S&P Global Composite PMI – Flash Estimate (June)