U.S. and Global Markets Rebound from Steep Losses of the Previous Week

Alexander Garcia
22 Jul, 2024
Miami

Stocks extended an early morning rebound in Monday's trading after sharp losses in the previous week, which halted a 3-month rally. 

Market sentiment recovered following steep losses in Friday's trading after a product upgrade by Crowdstrike caused a severe meltdown of information systems around the world and pushed tech stocks lower. 

The S&P 500 index and the Nasdaq Composite rebounded more than 1% in Monday's trading after falling more than 2% and 4%, respectively, in the previous week amid rising trade tensions between the U.S. and China and investors rotating into smaller and cyclical stocks. 

Market indexes were on the upswing as traders kept their eye on the fast-developing political landscape after U.S. President Joe Biden dropped out of the presidential race and endorsed Vice President Kamala Harris's nomination for the Democratic Party. 

57-year-old Harris is the front-runner for the Democratic Party, and she is likely to prove a tougher challenge for the Republican Party candidate, 78-year-old Donald Trump. 

On the economic front this week, U.S. investors are looking ahead to the release of the second quarter GDP growth rate with an estimate of 2%, faster than the 1.4% rate in the first quarter.

In addition, the Price Consumption Expenditure Price Index, an alternative measure of inflation, is also expected to show a slight increase of 0.1% in June following a flat reading in May.

Investors are also looking forward to the release of quarterly results from some of the leading corporations this week, and Microsoft, Coca-Cola, Tesla, Visa, UPS, IBM, AT&T, and Exxon Mobil are scheduled to release their results. 

 

U.S. Indexes and Treasury Yields

The S&P 500 index increased 1.1% to 5,562.60,  the Nasdaq Composite rose 1.6% to 18,007.38, and the Russell 200 advanced 0.9% to 2,204.20.

The yield on 2-year Treasury notes edged higher to 4.53%, 10-year Treasury notes increased to 4.23%, and 30-year Treasury bonds edged higher to 4.43%.

WTI crude oil decreased $0.35 to $78.77 a barrel, and natural gas prices edged up 11 cents to $2.24 a thermal unit.

Gold decreased by $1.13 to $2,393.53 an ounce, and silver was down 13 cents to $29.08. 

The dollar index, which weighs the U.S. currency against a basket of foreign currencies, edged lower to 104.31.

 

U.S. Stock Movers 

Bank of America decreased 1.2% to $42.41 after Berkshire Hathaway said in a regulatory filing that it sold 33.9 million shares valued at $1.48 billion in the company. 

Nvidia Corp. advanced 3.9% to $122.22 after Reuters news reported that the company is preparing a Chinese version of the Blackwell chip for artificial intelligence that is compliant with U.S. export control. 

Crowdstrike Holdings decreased 10% to $274.13 after Guggenheim downgraded stock to "neutral' from "buy," adding that the company is likely to face near-term challenges after the company's product upgrade caused the global outage last weekend. 

 

European Indexes Gained 1%

European market indexes rebounded in Monday's trading, and bond yields edged lower. 

Benchmark indexes in Paris, London, and Frankfurt advanced, powered by a rebound in tech stocks, mining companies, and luxury retailers. 

The People's Bank of China unexpectedly lowered its seven-day repo rate and one-year and five-year loan prime rates to record low levels. 

The central bank lowered its one-year and five-year loan prime rates by 10 basis points to 3.35% and 3.85%, respectively, to support the fragile economic recovery. 

Market sentiment was also positive after U.S. President Joe Biden dropped out of the presidential race and offered his support to Vice President Kamala Harris as a Democratic Party candidate. 

The Republican Party's candidate, Donald Trump, a convicted felon and a target of several U.S. government investigations, has been a vocal critic of the Ukraine war and has supported the ending of the war. 

Former U.S. President Trump threatened to drop out of NATO, the North Atlantic Treaty Organization, during his presidency between 2017 and 2021. 

 

Europe Indexes and Yields

The DAX index increased by 1.3% to 18,407.07; the CAC-40 index rose by 1.2% to 7,622.02; and the FTSE 100 index advanced by 0.4% to 8,198.78.

The yield on 10-year German bonds edged higher to 2.46%, French bonds inched higher to 3.12%, the UK gilts inched higher to 4.13%, and Italian bonds decreased to 3.75%.

The euro edged lower to $1.09; the British pound inched higher to $1.29; and the U.S. dollar weakened to 88.84 Swiss cents.

Brent crude decreased $0.35 to $82.27 a barrel, and the Dutch TTF natural gas rose by €0.15 to €31.86 per MWh.

 

Europe Stock Movers

Ocado PLC rose 9.4% to 415.27 pence after the U.S.-based largest independent grocery chain operator placed an order for its customer fulfillment centers.

Rentokil Initial plc jumped 9.3% to 490.50 pence on reports that former BT chief Philip plans to acquire the British pest-control company. 

Belimo Holding AG soared 15.2% to CHF 512.50 after the Swiss ventilation product company raised its sales outlook. 

Ryanair Holdings plc dropped 13.4% to €14.37 after the discount airline reported a 46% decline in its quarterly profit. 

Hammerson plc increased 3.4% to 30.14 pence after the British property company agreed to sell its entire stake in the Value Retail business for an enterprise value of £1.5 billion, generating cash flow of £600 million. 

Entain PLC increased 5.6% to 680.52 pence after the UK-based gambling firm appointed Gavin Isaacs, former chief of Scientific Games, as its new chief executive. 

Airbus SE increased by 0.9% to €133.0 after French media reports indicated that the European aerospace company has narrowed down to eight potential sites in India for the final assembly line for H125 helicopters. 

 

Japan Indexes Extend 4-day Losses

Stocks in Tokyo faced selling pressure amid heightened geopolitical uncertainty and caution ahead of the Bank of Japan's monetary policy decisions next week. 

The Nikkei 225 and the Topix indexes declined tracking losses in Friday's trading on Wall Street, following the losses in tech stocks after Microsoft and Crowdstrike product changes knocked down information systems around the world. 

Two benchmark indexes extended losses to the fourth session in a row and dropped to their three-week lows. 

Investors were also on the defensive after U.S. President Joe Biden dropped out of the presidential race and endorsed vice president Kamala Harris. 

Democratic frontrunner Harris is likely to continue defense cooperation with Japan and maintain an active role in keeping international trade and defense alliances intact, unlike Republican Party candidate Donald Trump with a checkered past and weak grasp on international affairs. 

The yen edged slightly higher to 156.85 against the U.S. dollar in the hopes that the Bank of Japan may revise rates higher at the end of its policy meeting next week and shrink the wide yield gap between the U.S. and Japan. 

 

Japan Stock Movers 

The Nikkei 225 stock average declined 1.3% to 39,558.24 and the Topix index dropped 1.2% to 2,827.88. 

Tech stocks were among the leading decliners in Tokyo in Monday's trading. 

Tokyo Electron, Avantest, Screen Holdings, and Lastertec declined between 1% and 2%. 

Financial stocks were also under pressure amid interest rate path uncertainty. 

Mitsubishi UFJ Financial, Mizuho Financial, and Sumitomo Mitsui Financial declined between 0.2% and 1%. 

Teijin Ltd. increased 4% to ¥ 1,430.50, and East Japan Railway rose 3.2% to  ¥2,779.50. 

Travel stocks were in focus amid a surge in the arrival of foreign tourists following the sharp decline in the yen this year. 

West Japan Railway increased 1.8% to ¥2,950.0, Central Japan Railway jumped 0.9% to ¥3,508.0, and Japan Airlines declined 0.1% to ¥2,500.0, and Isetan Mitsukoshi decreased 0.9% to ¥3,264.0. 

 

Hong Kong Stocks Rebounded After PBoC Unexpectedly Lowered Rates 

Market indexes in Hong Kong advanced but in Shanghai declined amid a lack of strong policy support for the revival of long-term economic growth after the ending of the third plenary session of Communist Party leaders. 

The Hang Seng index gained 0.7%, and the CSI 300 index, tracking the largest stocks on the mainland, declined 1%. 

The People's Bank of China unexpectedly lowered its seven-day reverse repo rate and loan prime rates as the central bank facilitated lending to corporations to revive economic growth. 

The move comes after the policymakers vowed to offer more support to the economy during the four-day Third Plenum last week. 

The one-year loan prime rate was lowered by 10 basis points to 3.35%, and the five-year rate was trimmed by the same amount to 3.85%. 

Both rates dropped to new lows as the central bank reacted to a weak second quarter GDP growth rate and mixed economic data for June released a few days ago. 

The central bank also lowered the seven-day reverse repo rate to 1.7% from 1.8%. 

 

China Stock Movers 

The Hang Seng index rebounded after falling nearly 5% in the previous week, its largest weekly loss in nearly two months. 

The Hang Seng index increased 0.7% to 17,539.38 and the CSI 300 index decreased 1% to 3,502.10. 

Travel-related stocks were focused on the expected surge in demand ahead of the summer travel in a few weeks. 

Trip.com increased 4% to HK $358.0, and Tongcheng Travel Holdings declined 0.3% to HK $13.72. 

Technology stocks were also among the most actively traded stocks in Monday's trading. 

Tencent Holdings jumped 2.4% to HK $372.60, Alibaba Group advanced 1% to HK $74.55, Baidu gained 11.1% to HK $89.15. 

Hebei Keli Automobile Equipment, an automobile glassmaker, soared more than 110% on the first day of its trading to 65.32 yuan after the company priced its initial public offering at 30 yuan and raised 510 million yuan.