12 June Nasdaq High With Tech Stocks Gains With Positive CPI data
After the positive inflation data came in at 8.30 ET, the stock market started the session on a high note.
The May Consumer Price Index (CPI) showed some welcome disinflation on a year-over-year basis in total CPI was +3.3% compared to +3.4% in previous month and core CPI cames in at +3.4% lower than previous month of +3.6%.
Target Range For Fed Funds Rate Left Unchanged By FOMC
As expected, the Federal Open Market Committee (FOMC) decided to keep the target range for the fed funds rate unchanged at 5.25-5.50% with unanimous vote,
The directive emphasised again that the Committee does not expect it will be appropriate to reduce the target range until it has greater confidence that inflation is moving sustainably toward 2 percent.
The Summary of Economic Projections (SEP) showed a median estimate of only one rate cut this year versus three in the March projections.
After Fed Chair Powell's non-committal comments about the policy path, the market started to experience some volatility.
Indices Higher. Yield Volatile Action But Solid Gains
Even though there was some turbulence initially, the S&P 500 (+0.9%) and Nasdaq Composite (+1.5%) managed to settle further into record territory. The Dow Jones Industrial Average (-0.1%) closed slightly lower after late-session choppiness.
Volatile action was also seen in the Treasury market and the 10-year note yield fell 11 basis points to 4.30%, and the 2-year note yield fell eight basis points to 4.75%. But the market eventually managed to close with solid gains.
Fed Rate Cut More Likely For September 2024. Only One For 2024 Potential
The Federal Reserve adjusted its interest-rate projection for 2024, now anticipating just one 25-basis-point reduction, down from the three cuts forecasted in March. This decision followed a softer-than-expected inflation report for May, increasing optimism about potential rate cuts. However, policymakers emphasized the need for consecutive months of declining price pressures before considering rate reductions.
The fed funds futures market is now pricing in a 56.5% probability of a 25 basis points rate cut at the September FOMC meeting, up from 52.8% on Tuesday (11 June)
S&P 500 Info Tech Sector Biggest Gainer
Wednesday’s gains show many stocks benefiting from it, this helped to lead the equal-weighted S&P 500 to close 0.5% higher, with seven of the 11 S&P 500 sectors closing with gains. The information technology sector logged the biggest gain as influential components reached fresh highs:
Many stocks participated in today's gains, leading the equal-weighted S&P 500 to close 0.5% higher, with seven of the 11 S&P 500 sectors closing with gains.
The information technology sector logged the biggest gain with 2.46% as influential components closing at their new highs like Apple (AAPL) closed at 213.07 with +2.9%, NVIDIA (NVDA) closed at 125.20 with +3.6%. Microsoft (MSFT) closed at 441.06 with +1.9%. Oracle (ORCL) closed at 140.38 with +13.3%.
Wednesday Data Recognise Year-Over-Year Disinflation
Wednesday’s economic data key takeaway is the recognition of year-over-year disinflation, indicating prices moved in the Fed's desired direction. This suggests there won't be another rate hike, and a rate cut could come as early as September.
Thursday May PPI and Core PPI In Watch
We will be watching the May PPI and Core PPI before the market open on Thursday (13 June 2024), together with the rest of the following economic data.
Stocks To Watch
$Broadcom(AVGO.US$ shares surged 9% in extended-hours trading following a robust fiscal second-quarter performance and optimistic guidance. The semiconductor and software giant reported an adjusted EPS of $10.96, beating estimates by $0.12, and revenue of $12.49B, exceeding expectations by $480M. The company also announced a 10-for-1 stock split set to commence on 15 July 2024, and projected fiscal 2024 revenue of $51B, including contributions from VMware.
I think we would like to know if this is a good time to buy Broadcom, if we take lesson from Nvidia, we would roughly know that there should be not much movement after the stock split, the percentage increase should be around 2-4%.
Actually the best BUY potential was last Wednesday (05 June), though that is not the best low price, but that is quite a good time to load up, so we have seen the after hours surge making Broadcom go above 1,700, then I would be looking at around 160 dollars after the stock split.
Whirlpool Corp. (WHR) saw its stock rise 7% amid speculation of a potential takeover. This surge in stock price followed an alert suggesting that the home appliance maker might be attracting acquisition interest. Whirlpool has a market cap of $4.8 billion and a short interest of 15.5% of its float.
$Oracle(ORCL.US$ shares jumped more than 13%, marking their best session since December 2021. Despite a weaker-than-expected fourth-quarter, Wall Street reacted positively to strong bookings and optimistic guidance for the upcoming fiscal year. Oracle signed 30 Oracle Cloud Infrastructure customers, driving $12.5B in AI bookings and bringing its total remaining performance obligations to $98B.
There are still some potential for Oracle to go higher and its current stock price at around 140 looks reasonable. You might want to take some positions as I foresee Oracle to reach above $180 by end of July 2024.
$Zscaler(ZS.US$ continued its upward momentum, closing 0.6% higher on Wednesday, marking seven consecutive sessions of gains. The cloud security firm has seen a 16% increase in its stock value this year. Recently, Zscaler announced a partnership with Nvidia to deliver generative AI-powered security innovations, further boosting investor confidence.
If we looked at the demand for cloud security services especially when most of the AI workload is on the cloud, Zscaler matured products make them one of the preferred partner, now with the partnership with Nvidia, I think we could see better services coming from Zscaler.
Summary
If we looked at how CPI data released on Wednesday have given the recognition of year-over-year disinflation, indicating prices moved in the Fed's desired direction. The probabilities of September 2024, the only rate cut for 2024 would be increasing over time.
Market should be reacting pretty well with this one rate cut, though some volatile trading might appear, but semiconductor sector should be doing well ahead of Broadcom’s stock split.
Appreciate if you could share your thoughts in the comment section whether you think semiconductor sector would continue to do well with the strength of Nvidia and Broadcom powering the sector?
Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
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