Q2 2024 PERFORMANCE OVERVIEW
July 1, 2024
Linea Mercati Interview 7/1/24
July 2, 2024The New York Stock Exchange closed down on Friday to end a very dynamic half-year for the indices, while American inflation slowed slightly, as expected.
The Dow Jones index lost 0.12% to 39,188.86 points. The Nasdaq, with its strong technological coloring, and the S&P 500, which during the session came close to new records, fell respectively by 0.71% to 17,732.60 points and by 0.41% to 5,460.48 points.
While Wall Street had started in the green welcoming inflation in the United States which had stalled, the indices changed direction in the wake of a sudden rise in bond yields.
Ten-year rates rose to 4.35% from 4.28%. For Karl Haeling of LBBW, this sudden tension in the bond market could be explained by the approach of intervention by the Bank of Japan (BoJ) to support the yen.
“There has been talk on the market all week of the BoJ’s intention to wait for the publication of the American PCE inflation index to intervene when trade is weak, which would cost less money to support the yen” , explained Mr. Haeling.
“The last time they intervened, it was a Friday afternoon New York time,” the analyst recalled.
If this hypothesis is true, bond yields rise because Japan may sell US Treasury bonds to finance its intervention.
A delayed reaction to the presidential debate the day before between Joe Biden and Donald Trump cannot be ruled out to explain the decline in stocks at the end of the session.
While the debate seems to have turned to the advantage of the Republican candidate, some investors fear that the policy of an elected Donald Trump “will be inflationary, with increases in import taxes”, underlined Karl Haeling.
Even down slightly on Friday, stocks nevertheless closed with a fabulous quarter, or even half-year.
Over the first six months of the year, the Nasdaq, boosted by the enthusiasm around interactive artificial intelligence and the semiconductor sector, soared by almost 20%.
The broader S&P 500 index rose more than 15% while the Dow Jones advanced 4%.
On Friday, the US Department of Commerce released the PCE inflation index, the Fed’s preferred measure for judging price developments, which stalled as expected in May.
It stood at 2.6% over one year, after 2.7% in April.
Over one month, prices remained the same, the inflation rate being zero, compared to +0.3% the previous month.
The annual change in PCE “has decelerated to its slowest pace since 2021 and is within reach of the Fed’s 2% target,” commented Rubeela Farooqi, chief economist for High Frequency Economics.
For Peter Cardillo of Spartan Capital, “this shows that inflation has peaked and is moving in the right direction.”
On the value front, semiconductors, the Nasdaq’s favorite sector with Nvidia (-0.36%), remained positive.
AMD gained 1.72%, Qualcomm 2.07% and Taiwan Semiconductor Manufacturing, which is approaching the $1,000 billion valuation mark on the stock market, gained 1.28%.
Nike stock collapsed 19.99% for the worst session in its history after mixed results in the fourth quarter. At $12.6 billion, quarterly sales disappointed, notably with poor performance in China.
The distributor Foot Locker lost 2.35%.
The DJT stock of Donald Trump’s social network, Trump Media and Technology Group sank 10.84% after an acrimonious televised debate between President Joe Biden and candidate Donald Trump.
Semiconductor company Infinera soared 15.78% to $6.09 after Finland’s Nokia announced the buyout of the company in a deal valued at $2.3 billion.
