A broad rally in US tech stocks is extending for a second day, with Nasdaq 100 futures rising over 1%. Amazon is the standout in premarket trading, up by 12% after reporting a fifth quarter of cloud sales growth, while Apple is sinking 7% after its sales forecast was dented by industry-wide supply shortages.The gains in big-tech come amid signs that, for some, AI spending is paying off - underpinned by strong demand.
Amazon shares rallied in late trading after it reported AWS revenue growth of 37%, above consensus of 31.3% and the fastest clip since 2021, enabling traders to overlook another increased capex guide and negative free-cash flow.On the flip side, Apple shares fell after component shortages weighed on the company’s sales forecast, echoing caution mentioned by Qualcomm the previous day.
Apple had run into the print as the best performing stock within the Mag 7 cohort year-to-date.“The worst of the positioning washout is probably behind us,” said Florian Ielpo at Lombard Odier Investment Managers. “On valuations, I would say they are more reasonable than a month ago, not cheap.
So this is not the end of the AI trade, it is probably the end of its easy phase.”Nasdaq 100 futures climbed 1.2%, while those for the S&P 500 rose 0.
5%. With earnings season past the half-way mark, 86% of the 291 S&P 500 companies reported have beaten estimates, tracking the highest pace in five years, according to Bloomberg Intelligence data.AI-linked stocks “breathed a giant sigh of relief,” writes Vital Knowledge founder Adam Crisafulli, noting many investors attributing the pain of the last several weeks exclusively to technical dislocations.
But the industry isn’t in the clear as there remains “a spending sustainability problem when it comes to AI that’s not going away as people continue to question the ultimate ROI on the mountains of capital being ploughed into data centers,” Crisafulli adds.After a volatile month, the hyperbolic moves (down and up) are nowhere more exemplified than by a record rally in South Korea’s Kospi Index overnight.An unprecedented 18% surge in South Korea’s Kospi Index led the global charge after memory giant SK Hynix Inc.
hit the 30% daily limit.Europe’s Stoxx 600 headed for a record high, with just over half of Stoxx 600 firms having topped expectations, according to Barclays.And yet, US stocks’ valuation premium to European stocks is near the lowest since January 2022.
Even with futures pointing to gains Friday, the S&P 500 is on track for its first decline in July since 2014.Elsewhere, we have more delveraging pain as a hedge fund managed by Jupiter Research Capital lost more than 40% of its value in just over three weeks of trading this month. The news comes fast on the heels of Situational Awareness selling a chunk of its AI-related public equities.
The yen briefly saw a sharp rise against the dollar a day after authorities intervened to support the currency and following the BOJ’s decision to keep rates on hold.Strategists view Bank of Japan Governor Kazuo Ueda’s comments at press conference following the central bank’s decision to hold rates as moderately hawkish with some expecting an earlier rate hike.The Bloomberg Dollar Spot Index fluctuated with the yen, but is now up about 0.
2% again.Treasuries are leading the gains in bond markets and mostly at the long end, with 30-year yields falling by around two basis points.“While the messaging on inflation has been firm, investors are still trying to assess how that commitment will translate into policy decisions,” said Francisco Simon at Santander Asset Management.
“The combination of a credible inflation objective, but less visibility on the path of policy decisions, could translate into higher volatility in rates markets.”Those gains in bonds, however, paring after oil prices erased their decline for the day following headlines than Iran is blocking the passage of six tankers in the Strait of Hormuz. Brent is on track for a jump of around 20% for July and is currently trading around $89/barrel.
And gold is falling to get nearer to $4,000/oz.Meanwhile, China’s manufacturing PMI unexpectedly slipped back into contraction as weak domestic demand continues to weigh on growth (iron ore creaking).10 Things You Shouldn't Miss This Morning(via Goldman's Jack McKeon)1) Japan and South Korea have stepped in to buy their currencies, possibly with involvement from the United States, in a rare coordinated intervention, sources and analysts said.
The intervention gave the yen its biggest boost in almost two years and, if the past is any guide, any joint effort with the U.S. may prove strong enough to turn around the battered currency.
CNBC2) BOJ keeps interest rates steady at 1%, as expected. on Friday they warned for the first time that underlying inflation could exceed its target and said future policy discussions would focus on upside price risks, signaling the chance of a rate hike as soon as September. The hawkish signals came after the government's suspected yen-buying market intervention in New York markets on Thursday that underscored Tokyo's concern over the pain the weak yen was inflicting on households through rising import costs.
RTRS3) China’s factory activity unexpectedly contracted in July for the first time since February, as domestic orders slumped and typhoons disrupted production, while part of the front-loading momentum began to unwind, piling pressure on Beijing to boost domestic demand. BBG4) Eurozone CPI was inline on the headline for Jul at +2.9% (up from +2.
8% in June) while core ran a bit hot at +2.5% (vs. the Street +2.
4% and up from +2.4% in June). BBG5) South Korea’s Kospi surged by a record 18% as SK Hynix hit the 30% daily limit and Samsung soared.
BBG6) Chevron beat estimates as prices for crude, gasoline and diesel surged. Exxon narrowly missed forecasts on maintenance costs. BBG7) Donald Trump signed an order allowing export restrictions on industrial waste containing critical minerals, aiming to boost US supplies and reduce reliance on China for key materials.
BBG8) Microsoft made market history. The software giant added $450 billion, the biggest one-day gain ever by a stock, after shares closed up 16% yesterday on surging cloud revenues. That’s bigger than 96% of S&P 500 companies.
BBG9) Tesla is weighing the separation of its China unit ahead of a potential SpaceX merger, according to the WSJ. Elon Musk called the report “fake news.” BBG10) By far the most highly sought-after theme over the past two months has been the proliferation of levered/inverse ETFs.
As of Wednesday, US-listed levered/inverse ETF AUM hovered just shy of $150 billion, shedding nearly $60 billion since June highs. However, the reversion of AUM has had an outsized impact on net exposure for the complex, which has slid by roughly $170 billion over the past month and now represents $300 billion after Wednesday’s close (yielding an asset-weighted leverage ratio of ~2.1x)… expecting a bounce in these levels as today’s AUM metrics are published today.
Markets At A GlanceUS Premarket Movers of Note:AMZN US (+12%): Amazon Gains After Fifth Quarter of Cloud Sales GrowthMPWR US (+8.6%): Monolithic Power Jumps on Strong Results and Guide: Street WrapDXCM US (+7.3%): Dexcom Narrows FY Revenue ForecastRIVN US (+4.
3%): Rivian Narrows Loss While Rolling Out Lower-Cost EV ModelsNXT US (+3.5%): Nextpower Boosts FY Adjusted EPS Forecast, Beats EstimatesFSLR US (+3.4%): First Solar 2Q EPS Beats EstimatesCORZ US (+3.
4%): Core Scientific Raised to Buy at Freedom Capital; PT $33TSLA US (+2.4%): Tesla Weighs China Unit Sale Ahead of SpaceX Deal, WSJ SaysTEM US (+2.3%): Tempus AI 2Q Net Revenue Meets EstimatesCOIN US (-4.
0%): Coinbase 2Q Total Revenue Misses Estimates: SnapshotSYK US (-5.2%): Stryker Slides After FY Organic Revenue Guidance UnderwhelmsAAPL US (-7.1%): Apple Slides After Supply Shortages Hurt Sales ForecastRDDT US (-9.
0%): Reddit 3Q Revenue Forecast Beats EstimatesGDDY US (-11%): GoDaddy Sha