(Bloomberg) — A renewed bout of volatility gripped stocks after a decline in Nvidia Corp. raised concerns that the growth of big tech – and the overall market – would have to take a breather.
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The company at the heart of the artificial intelligence revolution plunged 12% in three days, losing more than $300 billion in value over that period. A surge in demand for artificial intelligence chips briefly made Nvidia the world’s largest company last week. The firm has also become the most expensive stock in the S&P 500 Index, with its shares trading for roughly 23 times the company’s projected sales over the next 12 months.
After a tech-led rally in stocks, Deutsche Bank AG strategists led by Binky Chadha say US stocks are set to stall. There’s a lot of good news floating around the markets right now, and if that optimism turns out to be unwarranted, there could be downside risks, noted Lori Calvasina at RBC Capital Markets. The market continues to want to expand but still struggles to do so, she added.
“More broadly, last week saw some of the largest inflows on record into large-cap technology/growth funds,” said Jonathan Krinsky at BTIG. “This feels like a tipping point after the run we’ve had. We remain concerned about a short-term softening of many year-to-date leaders. If the S&P 500 is to avoid a bigger pullback in July, bulls should see the continued rotation below the surface.
The S&P 500 held close to 5,480, while the Nasdaq 100 underperformed the major benchmarks after coming very close to the 20,000 mark last week. Nvidia sank about 6% on Monday. 10-year Treasury yields were little changed at 4.26%. Bitcoin fell to around $61,000.
For Matt Maley at Miller Tabak, if the weakness in some large-cap tech names we saw late last week spreads to the rest of the group, it’s likely to create some problems for the broader market. At least in the short term.
“A downturn in the tech sector is certainly possible, even if the tech sector does well over the summer months in general,” Maley noted. “Even if you agree with the most bullish scenario for the AI phenomenon for the second half of 2024, neither group moves in a straight line.”
The strategist noted that the upcoming results from Micron Technology Inc. on Wednesday could be key on this front.
For John Stoltzfus at Oppenheimer, while some short-term gains are to be expected, especially in segments that have seen outstanding developments, the US bull market looks stable as investors increase their exposures to stocks. Short-term volatility continues to present opportunities, he noted.
“The stock market is not in a bubble, and while megacap growth stock valuations have stretched, stock prices haven’t been disconnected from fundamentals like they did during the tech bubble of 2000,” said Emily Bowersock Hill at Bowersock Capital Partners. “Right now, the market is rewarding companies for delivering strong earnings and punishing those that don’t.”
Corporate Highlights:
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Apple Inc.’s antitrust dispute with the European Union over alleged illegal practices in the App Store intensified after watchdogs issued a new warning that could lead to more fines — just months after they hit the iPhone maker with 1.8 billion euros ($1.9 billion). penalty for disrupting music streaming rivals.
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Shares of Alnylam Pharmaceuticals Inc. rose after its drug succeeded in treating a progressive and deadly form of heart disease, potentially opening a new avenue for the company’s best-selling product.
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GSK Plc has lost to Pfizer Inc. in a contract to supply millions of doses of its blockbuster RSV vaccine to the UK, as a setback to the local pharmaceutical giant.
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Sonoco Products Co. agreed to buy Eviosys, a maker of cans and other packaging, from KPS Capital Partners for about $3.9 billion.
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Eurofins Scientific SE took its biggest dive in more than two decades after the lab testing company was targeted by Carson Block’s Muddy Waters Research.
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Online fashion retailer Shein confidentially filed documents with UK authorities for a possible listing in London, according to people familiar with the matter.
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Tencent Holdings Ltd.’s Dungeon & Fighter Mobile more than doubled the sales of Chinese best-seller Honor of Kings in its first month, according to an independent study, suggesting the online entertainment leader may have finally found a franchise to replace its legacy titles . .
This week’s highlights:
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US Conference Board consumer confidence on Tuesday
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The Fed’s Lisa Cook, Michelle Bowman speak Tuesday
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US new home sales on Wednesday
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China’s industrial earnings on Thursday
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Eurozone economic confidence, consumer confidence, on Thursday
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US Durable Goods, Initial Jobless Claims, GDP, Thursday
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Nike releases earnings on Thursday
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Japan Tokyo CPI, unemployment, industrial production, Friday
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US PCE inflation, spending and income, consumer sentiment at the University of Michigan on Friday
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Fed Thomas Barkin of the Fed on Friday
Some of the main movements in the markets:
INVENTORY
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The S&P 500 was up 0.3% at 11:02 a.m. New York time
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Nasdaq 100 fell 0.4%
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Dow Jones Industrial Average rose 1%
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Stoxx Europe 600 rose 0.8%
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MSCI World Index rose 0.4%
currencies
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The Bloomberg Dollar Spot Index fell 0.2%
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The euro rose 0.4% to $1.0731
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The British pound rose 0.3% to $1.2688
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The Japanese yen was little changed at 159.68 per dollar
Cryptocurrencies
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Bitcoin fell 3.9% to $61,226.16
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Ether fell 3.8% to $3,304.01
BONDS
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The 10-year Treasury yield was little changed at 4.26%
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Germany’s 10-year yield advanced two basis points to 2.43%
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Britain’s 10-year yield was little changed at 4.09%
wares
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West Texas Intermediate crude rose 0.7% to $81.30 a barrel
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Spot gold rose 0.4% to $2,331.14 an ounce
This story was produced with the help of Bloomberg Automation.
–With assistance from Vildana Hajric, Sujata Rao, Catherine Bosley, Matthew Burgess and Jeran Wittenstein.
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