Focus Shifts Back to Sectors and Earnings Following the Fed

For a second day in a row, we are seeing a significant divergence in performance between the Dow and the NASDAQ. Yesterday, the NASDAQ rallied 1.5% while the Dow fell 0.1%, this morning, NASDAQ futures are up 0.7%, while Dow futures are down 0.2%. European markets are taking it more on the chin today amid ongoing political turmoil with the Dax, MIB, and CAC all falling 1.0%, while the FTSE is down 0.3%.

Part of this difference appears to be due to traders thinking that perhaps high growth technology stocks, particularly those with AI exposure may be better able to weather a higher interest rate environment than stocks from cyclical or mature industries. Yesterday, the Fed held the Fed Funds rate steady and reduced its forecast for interest rate cuts this year to 1 from 3, blaming persistently elevated inflation. The US 10-year treasury note yield is holding steady near 4.30% this morning.

With this week’s big macro event out of the way, focus has turned back to individual stocks. Broadcom* is up 13.8% in premarket trading today after beating expectations on earnings ($10.96 vs street $10.85) and announcing a 10 for 1 stock split. Yesterday, Oracle jumped 13.3% following its earnings results. Adobe reports after the close today. On the other hand, Gamestop dropped 16.5% yesterday after the company announced another stock sale.

Traders have been trying to punch up the market in the last few minutes off of better-than-expected US inflation numbers, but this time it appears to be quickly faltering. US producer prices showed improvement last month (2.2% vs previous 2.5%, but previous was revised up to 2.3% from 2.2%). US weekly initial jobless claims, however, were significantly worse than expected, coming in at their highest level since last August (242K vs street 225K).  

Energy and metal prices are having another tough day. Silver is down 3.6%, Gold is down 1.2%, Copper is down 0.3%, US Crude Oil is down 0.5%, and Natural Gas is down 2.1%.

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