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Nasdaq/Tech/A.I. Leading Markets Again

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Monday, June 17th, 2024

Pre-market futures pick up where they left off on Friday: bifurcated. While we’ve seen more than +1.2% gains on the S&P 500 and +2.2% on the Nasdaq over the past week of trading, the Dow has dropped nearly -1% and the small-cap Russell 2000 -1.5% over the same time period. Currently this morning, we’re -70 points on the Dow, -2 on the S&P, -7 points on the Russell, and +26 points on the Nasdaq. The tech-heavy bull run is perhaps looking a little long in the tooth (horn?) — with the Nasdaq notching yet another all-time closing high Friday — but still leading market indices forward.

It’s been a top-heavy market, as we know. Going back a year — when the A.I. trade was already in full throttle — we’ve seen +23% growth in the S&P 500, but “only” +16% when we strip out tech-sector stocks. Of course, +16% growth in a year is still historically strong, but when compared to the +12% we’ve seen in the Dow from a year ago, that +23% nearly doubles the performance of the blue-chip index. And because we again see the Nasdaq climbing into the green while the other indices crawl in the red, we see this trend continuing.

The tip of the spear of this A.I. trade is, of course, NVIDIA (NVDA - Free Report) . The innovator of the graphics processing unit (GPU) also was first to build out data center infrastructure for A.I. development, and has been generously rewarded: +9% in the last week, +42% in the past month, +173% year to date and +201% from one year ago. Further, we see sizable gains from large firms peripherally connected to NVIDIA like Oracle (ORCL - Free Report) and smaller growth firms like Super Micro Computer (SMCI - Free Report) — which are also Nasdaq firms.

Empire State manufacturing numbers are out for June. The headline -6 points is somewhat of an improvement over the expected -10.5, and less than half the unrevised -15.6 reported a month ago. The state of New York now has a string of seven straight negative manufacturing months, with nine of the past 12 months with a minus-sign in front of them. It’s a regional survey, as is Philly Fed manufacturing (which comes out Thursday morning), but depict the challenges faced by the goods-producing areas of our economy.

This week brings us a healthy number of economic prints. Retail Sales, Industry Production/Capacity Utilization and Business Inventories all hit the tape Tuesday. We take a break Wednesday in observance of the Juneteenth holiday, then pick up again on Thursday: Jobless Claims, Housing Starts/Building Permits and the Philly Fed. For Friday, PMI datas for Services and Manufacturing come out.

We’ll even see a few key earnings reports this week. In the homebuilding space, Lennar Corp. (LEN - Free Report) reports fiscal Q2 results today after the closing bell, with KB Home (KBH - Free Report) reporting tomorrow afternoon. Later in the week, Olive Garden parent Darden Restaurants (DRI - Free Report) , Kroger (KR - Free Report) supermarkets and CarMax (KMX - Free Report) will color in a picture in select retail markets. Next week will be the final week of calendar Q2, with earnings season following a couple weeks afterward.

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