Stock Indexes Soar as Technology Stocks Surge

What you need to know…

The S&P 500 Index ($SPX) (SPY) on Tuesday closed up +2.76%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +2.43%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +3.13%. 

U.S. stock indexes on Tuesday rallied sharply, with the S&P 500 and Dow Jones Industrials posting 3-week highs and the Nasdaq 100 posting a 1-1/4 month high.  Strength in technology stocks Tuesday led the overall market higher on speculation that bad news is already priced into markets and upside earnings surprises will lead to outsized gains in stocks. 

Travel stocks rallied Tuesday after Bank of America said spending on debit cards is up +10% in the first two weeks of July, with a shift in spending towards experience and travel.  Tuesday’s U.S. housing data was mixed for stocks as June housing starts fell more than expected to a 9-month low, but June building permits fell less than expected. 

Investors have recently exited stocks and moved into cash, according to the Bank of America’s monthly fund manager survey.  The survey indicated that as of July 15, investor allocation to stocks plunged to its lowest since October 2008, while exposure to cash surged to the highest since 2001.

U.S. June housing starts unexpectedly fell -2.0% m/m to a 9-month low of 1.559 million, weaker than expectations of an increase to 1.580 million. June building permits, a proxy for future construction, fell -0.6% m/m to 1.685 million, stronger than expectations of 1.650 million.

Today’s stock movers…

A jump in technology stocks Tuesday was bullish for the overall market.  Marvell Technology (MRVL) closed up more than +7%.  Also, Nvidia (NVDA), Advanced Micro Devices (AMD), Lam Research (LRCX), Align Technology (ALGN), Meta Platforms (META), and Applied Materials (AMAT) closed up more than +5%.  In addition,  Alphabet (GOOGL), Analog Devices (ADI), Qualcomm (QCOM), and Microchip Technology (MCHP) closed up more than +4%. 

Cruise line operators and airline stocks are rallying today after Bank of America said, “consumers continue to spend at a healthy pace,” with spending on debit cards up +10% in the first two weeks of July with a shift in spending towards experience and travel.  Carnival (CCL) closed up more than +7%.  Also, Royal Caribbean Cruises (RCL) and United Airlines Holdings (UAL) closed up more than +5%.  In addition, Delta Air Lines (DAL) and American Airlines Group (AAL) closed up more than +4%. 

Travel stocks are also gaining today on the Bank of America report.  Expedia Group (EXPE) closed up more than +6%, and Booking Holdings (BKNG) and Wynn Resorts (WYNN) closed up more than +5%.   Also, Host Hotels & Resorts (HST) and Marriot International (MAR) closed up more than +4%.  In addition, Hilton Worldwide Holdings (HLT) and MGM Resorts International (MGM) closed up more than +3%. 

Boeing (BA) closed up more than +5% Tuesday to lead gainers in the Dow Jones Industrials after VietJet Aviation JSC confirmed a deal to buy 200 of Boeing’s 737 Max jets.

General Motors (GM) closed up more than +5% Tuesday after the company announced it would start selling a battery-powered Chevrolet Blazer next year, followed by the launch of the electric Chevy Silverado and Equinox.

IBM (IBM) closed down more than -5% Tuesday to lead losers in the Dow Jones Industrials after cutting its forecast for free cash flow to the lower end of its $10.0-$10.5 billion range, citing the strong dollar and the loss of business in Russia.

Signature Bank/New York (SBNY) closed down more than -4% Tuesday after it reported a -$5 billion outflow of deposits in Q2.

Across the markets…

Sep 10-year T-notes (ZNU22) on Tuesday closed down -16 ticks, and the 10-year T-note yield rose +2.6 bp to 3.012%.  Weakness in 10-year German bunds Tuesday weighed on T-note prices as the 10-year German bund yield rose to a 1-week high of 1.308% after a report from Reuters said that ECB policymakers may consider raising interest rates on Thursday by 50 bp instead of 25 bp because of the worsening inflation backdrop.  Also, a sharp rally in stocks on Tuesday curbed the safe-haven demand for T-notes.

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