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Tech Giants Propel S&P 500 to Record Highs Despite Tesla's Slide

By:JJ Kinahan

Yet, malaise is lingering among investors despite surging markets and strong economic reports

  • Tech dominance is persisting in the market: Microsoft and Nvidia lead, overshadowing Tesla's setback and mixed retail signals.
  • Economic robustness is meeting the market malaise. Strong data is delaying an interest rate cut, but enthusiasm remains muted.
  • LVMH is exceling, Levi's job cuts signal retail challenges; oil is rising, and pivotal tech earnings reports are upcoming.

The S&P 500 reached a new high, marking a sixth consecutive day of gains and closing up 0.53%, while the Nasdaq Composite added 0.18%, defying weak numbers Tesla (TSLA)reported the previous night.

Some tech companies at record highs

Despite Tesla's 12% drop and a 24% monthly decline because of disappointing earnings and a cautionary outlook for 2024, other tech giants like Google (GOOG), Meta (META) and Microsoft (MSFT) closed at record highs, hinting at resilience within the sector. The Magnificent Seven, led by Microsoft and Nvidia (NVDA), are driving the market, accounting for 60% of the S&P 500's growth this year.

Microsoft, in the spotlight for both positive and negative reasons, announced layoffs in its Gaming unit after acquiring Activision Blizzard. Nvidia, not at a record high but near its peak, is emblematic of the concentrated nature of this year's market, reminiscent of last year's trends. Intel (INTC), a significant player signaling a potential area of concern despite its smaller AI presence.

In the retail realm, robust earnings for LVMH (LVMUY), though not directly tradable in the U.S., could influence expectations for high-end brands like Tiffany's. Conversely, the Levi Strauss & Co. (LEVI) plan to cut 10-15% of global corporate jobs highlights headwinds in the industry. Challenges, such as brand exits, business liquidations and currency fluctuations, possibly foreshadow troubles for other mainstream brands.

Lack of enthusiasm despite robust data

Economic data, particularly the personal consumption expenditures (PCE) report, aligns with a robust economy, pushing back expectations for an interest rate cut from March to May. However, despite the healthy economic indicators, there's a prevailing sense of malaise in both the economy and the stock market. This lack of exuberance, paradoxically, might be contributing to the continued upward momentum in markets.

The day's economic data, including personal income and spending, generally met expectations, with personal s pending exceeding projections. Even as economic indicators signal a robust economy, there's a noticeable absence of enthusiasm. This incongruity may be a factor in the market's upward trajectory, as markets often rally when sentiments are not overly exuberant.

Looking ahead, crude oil prices, now around $77 per barrel, are worth monitoring, along with a critical week for tech stocks featuring reports from Advanced Micro Devices (AMD), Apple (AAPL) , Google, Meta and Microsoft. The outcome of these reports could significantly impact the market's trajectory for the rest of 2024, aligning with the adage "as goes January, so goes the market." As always, the advice remains to adhere to your investing plan and long-term objectives amid the dynamic market conditions.

JJ Kinahan is CEO of IG North America—which includes tastylive, tastytrade and IG's FX Business. Kinahan traded for 21 years at the Chicago Board Options Exchange. He serves on the CBOE Advisory Board and the SIFMA Options Committee. @thejjkinahan 

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