MARKET WRAP

Equities once again shrugged off negative news that included a soft ADP payrolls number as well as China/US negotiations (or lack thereof). Ultimately the rally attempt failed but stocks were able to close mostly unchanged on the day. The story was a little different in the dollar and treasuries which once again saw volatility.

On the day: SPX flat, QQQ +0.3% and IWM -0.3%. The US10YY was sharply lower, now 4.36%, while DXY declined to $98.87. Oil pulled back a bit from its recent surge higher. Gold was slightly higher. Notably the VIX decline to 17.50, is very near the mid May level that then saw a slight pullback in equities.

After hours: The after hours are pretty quiet with SPY and QQQ near their closing prices. MDB is +13% on earnings.

• MRKT Call: The market’s blasé reactions to recent negative news. A look at the current batch of “meme” stocks. Plus your questions answered.

• RiskReversal Pod: Guy and Dan deep dive into the complexities of the U.S.-China trade relationship, tariffs on steel, the deficit, inflation concerns, and market indicators such as non-farm payrolls and CapEx spending.

MRKT MATRIX: TODAY’S TOP STORIES

• Dow falls, snapping four-day win streak, as soft payrolls report drags down sentiment (CNBC)

• A New Era of Trade Warfare Has Begun for the U.S. and China (NYTimes)

• Trump Says China’s Xi Is ‘Extremely Hard to Make a Deal With’ (Bloomberg)

• Trump’s 50% steel tariffs hit the world but UK spared full blow (CNBC)

• India Challenges US on Auto Tariffs in Toughening Trade Stance (Bloomberg)

• A Fatal Tesla Crash Shows the Limits of Full Self-Driving (Bloomberg)

• Musk calls Trump spending bill a ‘disgusting abomination’ (CNBC)

• Global Investors Have a New Reason to Pull Back From U.S. Debt (WSJ)

• CrowdStrike Shares Plunge After Sales Forecast Underwhelms (Bloomberg)

• Apple gets a rare downgrade as earnings and high valuation come under pressure (CNBC)

• Toyota Industries’ shares nosedive on $33 billion buyout deal - steepest fall in 10 months (CNBC)

  Wedbush, Dan Ives launch new ETF to capture the AI boom (CNBC)

WHAT’S NEXT?

So far this week, equities have continued to show impressive resilience, even as the headlines might have suggested otherwise. A string of potentially negative economic data points and renewed trade war tensions—under different circumstances—could have sparked a selloff. But instead, the market has largely shrugged it all off. That resilience could be coming from several places.

First, it may be a sign that investors are right and the worst is behind us.

• Investors seem to be looking through the noise, assuming that the most severe phase of the trade war—and any economic drag it created—is now in the rearview mirror. If that’s the case, then the recent batch of negative headlines is more like background static than a real threat, and the continued rally makes sense.

But there’s also a second possibility: the market’s V-shaped recovery off the April lows may now be running on a different kind of fuel—namely, follow-through buying that’s more technical than fundamentally motivated.

• After a near-record-speed -20% correction, there are still segments of the market trying to catch up. Some participants may still be chasing stocks they feel they "missed," looking to get in before names return to their February highs.

• And within that there may be another dynamic at play. Those who might normally be looking to fade this rally—or at least take some profits—are holding off, knowing that the risk of another squeeze on any positive trade war headline is still very real. No one wants to be on the wrong side of the TACO trade when it happens.

That setup creates an interesting opportunity. With implied volatility continuing to collapse—VIX is back near recent lows—the cost of positioning for a modest pullback in the 5–10% range is relatively cheap. For those looking to hedge recent gains, this may be a window to start exploring downside exposure, even as the tape remains firm for now. We’ll cover some of those concepts in trade form over the next few days. 

Before the open tomorrow we get the ECB rate decisions as well as Broadcom (AVGO) earnings after the close. And of course on Friday is the “all important” jobs number.

• Thursday

  • 8:15am - ECB Rate Decision

  • 8:30am - Initial Jobless Claims

  • 10am - Pending Home Sales

  • After Hours: AVGO 7%, DOCU 10%, LULU 9%

TODAY’S EPISODES

Watch MRKT Call’s newest episode: Chart Check on Meme Stocks: $PLTR, $APP, $HIMS & $CRWV

• Analysis: SPX, VIX, PLTR, CRWV, APP, HIMS, CRWD, ZS, WFC, Gold

• FactSet: John Butters Earnings Report: AI citations in Earnings 

• Your Questions Answered:

  • Can you opine on today’s market and any similarities or differences to past bubbles?

  • CoreWeave, nuts?

  • Gold stocks hanging in there, different than the past?

Learn more about our sponsor, CME Group.

Watch RiskReversal Podcast’s newest episode: The Great Wall of Worry: US-China Trade War Risks

Guy Adami and Dan Nathan discuss the current state of trade negotiations, tariffs, and their potential impacts on the market. They delve into the complexities of the U.S.-China trade relationship, the ramifications of increased tariffs on steel, and the ongoing issues of national debt and deficit. The conversation also touches upon market reactions, inflation concerns, and significant market indicators such as non-farm payrolls and CapEx spending. They address key market players like Elon Musk and the influence of geopolitical events on investor sentiment. Additionally, the hosts analyze specific stocks like CrowdStrike and Apple, considering their performance and valuation challenges. The podcast concludes with an outlook on upcoming economic reports and their potential influence on market trends.

Learn more about our sponsor Betterment and iConnections.

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