Stocks Surge on a Rally in Mega-Cap Tech Stocks

What you need to know…

The S&P 500 Index ($SPX) (SPY) on Tuesday closed up +2.45%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +2.15%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +2.49%. 

Stocks on Tuesday rallied sharply, with the major indexes climbing more than +2%.  Strength in mega-cap technology stocks Tuesday lifted the overall market as Apple, Alphabet, Qualcomm, and Nvidia all rose at least +3%.  Also, a +1% rally in crude oil prices Tuesday supported gains in energy stocks.  In addition, a decline in stock valuations with last week's selloff sparked some dip-buying by investors.

Tuesday’s U.S. economic data was bearish for stocks.  The May Chicago Fed national activity index fell -0.39 to an 8-month low of 0.01, weaker than expectations of unchanged at 0.47. Also, May existing home sales fell -3.4% m/m to a 2-year low of 5.41 million, although that was slightly stronger than expectations of 5.40 million.

Goldman Sachs and Morgan Stanley warned of more losses for stocks.  Morgan Stanley said the S&P 500 Index needs to drop another 15% to 20% to about 3,000 for the market to fully reflect the scale of economic contraction.  Also, Goldman Sachs said stocks were only pricing in a mild recession, "leaving them exposed to a further deterioration in expectations."

Today’s stock movers…

Mega-cap technology stocks rallied Tuesday and led the overall market higher.  Alphabet (GOOGL) and Nvidia (NVDA) closed up more than +4%.  Also, Apple (AAPL) and Qualcomm (QCOM) closed up more than +3%, and Amazon.com (AMZN), Microsoft (MSFT), and Cisco Systems (CSCO) closed up more than +2%. 

A rally of nearly +1% in crude oil prices Tuesday lifted energy stocks and energy service providers.  Diamondback Energy (FANG) closed up more than +8%.  Also, Exxon Mobil (XOM), Phillips 66 (PSX), Haliburton (HAL), ConocoPhillips (COP), and Schlumberger (SLB) closed up more than +6%.  In addition, Marathon Petroleum (MPC), Devon Energy (DVN), Occidental Petroleum (OXY), and Chevron (CVX) closed up more than +4%.

Tesla (TSLA) closed up more than +9% Tuesday to lead gainers in the S&P 500 and Nasdaq 100 after CEO Musk said Tesla would cut its salaried workforce by about 10% over the next three months.

Kellogg (K) closed up nearly +2% Tuesday after it said it would split into three independent companies, focusing on global snacks, North American cereals, and plant-based foods. 

DaVita (DVA) closed down more than -15% Tuesday to lead losers in the S&P 500 after the Supreme Court ruled in favor of an Ohio hospital’s employee health plan in a dispute with DaVita over how much the hospital pays for kidney dialysis.

Meta Platforms (META) closed down more than -4% Tuesday at a 2-year low to lead losers in the Nasdaq 100 after the Department of Justice (DOJ) reached a settlement with the company over ads and housing discrimination.  Meta will change its ad delivery system to address concerns that it violates the Fair Housing Act by discriminating against users.

Across the markets…

Sep 10-year T-notes (ZNU22) on Tuesday closed down by -12.5 ticks, and the 10-year T-note yield rose +7.4 bp to 3.300%.  T-notes on Tuesday fell back after a sharp rally in stocks reduced the safe-haven demand for government debt.  Also, Also, hawkish ECB comments Tuesday pushed European government bond yields higher and weighed on T-note prices.  In addition, supply pressures weighed on T-notes ahead of the Treasury’s $14 billion 20-year T-bond and $22 billion 2-year floating-rate note auctions on Wednesday.

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