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Extraordinary Market Movements: Insights You Need

Dive into this week’s market highlights: Mega Caps’ influence, key indices performance, GameStop’s resurgence, and economic data that could spark volatility. Stay updated with our in-depth analysis.

By Alpaca

Introduction

This past week has been particularly eventful, as key Mega Caps like Microsoft, Nvidia, and Apple have dominated market movements. With GameStop taking a major spotlight. Meanwhile, market breadth indicators reveal a mixed outlook, and upcoming economic data is set to introduce further volatility.

Major Indices Performance

The week closed on an interesting note, with the S&P 500 touching a record-high intraday. Despite slipping 0.11% on Friday to close at 5,346.99, the index managed to post a weekly gain. The Dow Jones Industrial Average fell by 87 points, ending at 38,798.99 but still managed a 0.23% weekly increase. Meanwhile, the Nasdaq Composite was down 0.23% on Friday, closing at 17,133.12, yet it saw the highest weekly gain among the three, advancing 1.59%.

  • S&P 500: Closes flat, records a 0.94% weekly gain

  • Dow Jones: Ends week with a 0.23% increase

  • Nasdaq Composite: Registers a strong 1.59% gain in the last 5 days of trading

Mega Caps Lead the Way

For the first time since 2000, three U.S. stocks—Microsoft (MSFT), Nvidia (NVDA), and Apple (AAPL)—account for more than 20% of the value of the S&P 500. These tech giants continue to attract significant investor interest, fueling a concentration narrative. Buying dips in these Mega Caps has been a persistent theme, particularly in the face of market volatility. Investors should keep a close watch on these stocks given their substantial influence on the overall market performance.

Impact of the Jobs Report

The U.S. economy added 272,000 jobs in May, significantly exceeding the 190,000 estimate. Despite this growth, the unemployment rate increased slightly to 4%. This robust job growth led to a rise in average hourly wages by 0.4%, pushing the yield on the 10-year Treasury higher by more than 15 basis points. Investors are now concerned about a potential delay in rate cuts with a strong job market remaining.

  • Jobs Added: 272,000 (vs. 190,000 estimate)

  • Unemployment Rate: Increased to 4%

  • Average Hourly Wages: Up by 0.4%

  • 10-Year Treasury Yield: Rose by more than 15 basis points

Market Sentiment Shift

Initially, investors hoped for weaker job figures to prompt the Federal Reserve to cut interest rates later in the year. However, the stronger-than-expected report has now shifted the focus to the economy’s capability to sustain growth without lower rates. Gary Cohn, IBM’s vice chairman, emphasized the positive aspects of strong economic growth and corporate earnings.

  • Expectation vs. Reality: Investors’ rate cut hopes dashed by strong job figures

  • Focus Shift: From rate cuts to economic resilience

  • Expert Opinion: Gary Cohn highlights strong economic and corporate performance

Global Economic Influences

The European Central Bank and the Bank of Canada recently cutting rates adds another layer of complexity to the rate cut timing decision. This move has placed additional pressure on the Federal Reserve’s upcoming policy decision. Markets eagerly await the Fed’s decision and stance after its June 11-12 meeting, which will offer more clarity on the future economic outlook.

  • ECB & BOC Rate Cut: Adds complexity

  • Fed’s Upcoming Meeting: June 11-12

  • Market Eagerness: Focus on Fed’s next steps

Stock Highlights

Nvidia continues to perform exceptionally well, closing the week up $71.26. The company reached a record high mid-week, crossing the $3 trillion market cap threshold, with Forbes projecting Nvidia will reach $10 Trillion by 2030.

GameStop is back in the spotlight after gaining a monstrous 30% over Keith Gill's return to social media. Shares plummeted over 28% following disappointing earnings and news of additional stock sales. Despite the live stream by Roaring Kitty to over 600,000 live viewers, the stock couldn't regain its footing after numerous momentum-hurting halts during the run-up.

  • Nvidia: Crossed the $3 trillion market cap

  • GameStop: Back in the spotlight, some are anticipating Roaring Kitty exercising his $21 call options if given the opportunity.

Writers Note: Please be cautious when investing in any meme stock. Do not put in what you can afford to lose. Looking back to 2021, stocks will be halted or buying shut down if things get too out of control.

Trade Easier Insights

Play of the Week

FedEx (FDX)

  • Pullback Entry Point: $244-$245

  • Upside Target: $254

  • Potential Rejection Zone: $254 (if the price moves to the upside before retracing)

  • Entry Strategy:

    • Pullback Zone: Monitor FDX for a pullback into the $244-$245 area. This range is seen as a strong support zone and an attractive entry point for long positions.

    • Confirmation: Look for confirmation signals such as bullish candlestick patterns, increased volume, or supportive technical indicators (e.g., RSI or MACD) when the price approaches the $244-$245 range.

  • Upside Play:

    • Target Area: Aim for a move to the $254 level. This area represents a significant resistance point where the price might face selling pressure.

    • Profit-Taking: Consider taking partial or full profits as FDX approaches the $254 mark to lock in gains and mitigate risk.

  • Rejection Scenario:

    • Potential Rejection Zone: If FDX reaches the $254 level before a pullback, be cautious of a possible rejection and price retracement. This area could see increased selling pressure as traders take profits.

    • Alternative Entry: If a rejection occurs at $254, wait for signs of a pullback towards the $244-$245 zone before considering long positions again.

Technical Indicators to Watch:

  • Relative Strength Index (RSI): Check if RSI approaches oversold levels near the $244-$245 entry zone, which could indicate a good buying opportunity.

  • Moving Averages: Monitor the 50-day and 200-day moving averages for potential support and resistance levels.

  • Volume: Look for increased volume during the pullback to confirm strong buying interest in the $244-$245 area.

Notable Events Next Week

  • FOMC Rate Decision and Consumer Price Index (CPI) release - Wednesday 06/12: Rate cuts will be the focus of the market on Wednesday as long as CPI does not come in too hot. With Europe and Canada cutting rates, we believe it is a matter of time for the U.S. Federal Reserve.

  • Jobless Claims and PPI (Producer Price Index) - Thursday 06/13 - With unemployment reaching 4% this past week, jobless claims will be an important indicator for the broader direction of the economy. Production inflationary pressured have been reported recently in the media as being a thing of the past, but Thursdays report will show if this is true or not.

  • University of Michigan's Consumer Sentiment Index - Friday 06/14

Earnings Reports to Watch

  • Oracle Corp. (ORCL)

  • Broadcom Inc. (AVGO)

  • Adobe Inc. (ADBE)

Conclusion

The past week has illustrated the volatile nature of today’s financial markets. While indices like the S&P 500 managed to touch record highs despite mixed economic indicators, and stocks like GameStop are back in the spotlight. Investors remain on edge, particularly as they await the Federal Reserve’s upcoming policy decisions amidst a stronger-than-expected jobs report and global economic decisions on rates.

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