‘Magnificent Seven’ Drive Gains With Nvidia Up 5%: Markets Wrap

(Bloomberg) — A rally in the world’s largest technology companies lifted stocks, with traders taking in stride weak economic reports.

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Equities extended their June advance as Nvidia Corp. rallied after a $430 billion plunge, leading gains in the “Magnificent Seven” cohort of megacaps. The giant chipmaker snapped a three-day rout that had pushed it into a technical correction. Treasuries saw small moves ahead of a $69 billion two-year auction that will kick off this week’s trio of note sales.

US consumer confidence eased on a more muted outlook for business conditions, the job market and incomes. Home-price gains slowed as would-be buyers facing higher mortgage rates pulled back. Fed Governor Michelle Bowman said she sees a number of upside risks to the inflation outlook, and reiterated the need to keep borrowing costs elevated for some time.

“We believe the bull market we are in isn’t going to be derailed until either we go into recession or the Fed changes interest-rate policy from potential cuts to actual hikes,” said Chris Zaccarelli at Independent Advisor Alliance. “Expect volatility between now and the end of the year, but don’t expect the bull market to end without a change in the economy or Fed posture.”

The S&P 500 topped 5,460, while the Nasdaq 100 rose 1%. Nvidia rallied over 5%. Carnival Corp. jumped on a bullish outlook. A nascent rally in transportation stocks will face a crucial test late Tuesday when FedEx Corp. reports results that will shed light on the strength of the US economy.

Treasury 10-year yields rose one basis point to 4.25%. Bitcoin hovered near $62,000. The loonie fluctuated as inflation unexpectedly surged in Canada, a setback for policymakers as they weigh further rate cuts next month.

Nvidia’s recent selloff isn’t reflective of a worsening outlook for tech or the broader market, as other demand signals are positive, according to UBS.

“Nvidia’s correction shouldn’t be mistaken as a warning signal on either the structural investment case for AI or the broader equity outlook,” wrote Solita Marcelli, chief investment officer Americas at UBS Global Wealth Management

To Neuberger Berman Group’s Steve Eisman, the chipmaker’s three-day plunge is no more than a blip.

The senior portfolio manager, best known for his short bet against subprime mortgages ahead of the global financial crisis, owns “a lot” of the chipmaker’s shares and considers it a long-term play that’s going to be relevant for years to come, he said Tuesday in an an interview on Bloomberg Television.

Bank of America Corp. said clients were net sellers of US equities for the first time in a month last week, with outflows led by hedge funds and institutions as retail investors snapped up shares.

Outflows by BofA clients totaled net $1.6 billion in the week ended June 21, quantitative strategists led by Jill Carey Hall said Tuesday in a note to clients. At the sector level, technology and communications services led inflows. Financials saw the largest outflows.

Investor positioning continued to reflect a preference towards US versus European equities last week, according to Citigroup strategists. A team lead by Chris Montagu noted that S&P 500 and Nasdaq bullish positioning edged higher — but with slowing momentum on the latter.

Commodity Trading Advisors, or CTAs, are estimated to hold $130 billion worth of long positions — or the 84th percentile — in global equities, after selling $29 billion last week, and are likely to sell more in every market scenario this week, according to Goldman Sachs Group Inc.

Equity derivatives and flows specialist Cullen Morgan estimates that CTAs would sell $36 billion of equities, including $2.8 billion of S&P 500 futures, this week in a falling market, and $15 billion of stocks in a flat market. Even if stocks were to rise, they are expected to sell $3 billion of stocks.

Corporate Highlights:

Exxon Mobil Corp. took the first step toward what will be its seventh oil project in Guyana, a clear signal the supermajor intends to expand crude output from the South American nation into the next decade.
Boeing Co. has offered to acquire Spirit AeroSystems Holdings Inc. for about $35 a share in a deal funded mostly with stock, according to people familiar with the matter.
Airbus SE is coming up short on the millions of parts that make up the company’s commercial aircraft, and the situation is getting worse rather than better for the world’s largest planemaker.
Microsoft Corp. risks a hefty European Union fine after regulators accused the company of abusing its market power by bundling the Teams video-conferencing app to its other business software.
OpenAI is taking additional steps to curb China’s access to artificial intelligence software, enforcing an existing policy to block users in nations outside of the territory it supports.
AbbVie Inc. failed to win approval for a new Parkinson’s disease drug after US regulators found problems at a third-party manufacturing facility.

Key events this week:

US new home sales, Wednesday
China industrial profits, Thursday
Eurozone economic confidence, consumer confidence, Thursday
US durable goods, initial jobless claims, GDP, Thursday
Nike releases earnings, Thursday
Japan Tokyo CPI, unemployment, industrial production, Friday
US PCE inflation, spending and income, University of Michigan consumer sentiment, Friday
Fed’s Thomas Barkin speaks, Friday

Some of the main moves in markets:

Stocks