US Stocks Rebound: Dow Jumps 300 Points, Nasdaq & S&P Gain Over 1%

• News
• 2024-07-17

* Major indices halt their decline and rebound

* U.S. trade deficit narrows to $73.1 billion in June

* International oil prices stop a three-day losing streak

On August 6th (Tuesday), local time, the U.S. stock market followed the global stock market's rebound after the previous day's sharp decline, with technology stocks leading the way, and a series of corporate earnings reports also boosting market sentiment.

As of the close of the day, the Dow Jones Industrial Average rose by 294.39 points from the previous trading day, a gain of 0.76%, to 38,997.66 points; the S&P 500 stock index rose by 53.70 points, a gain of 1.04%, to 5,240.03 points; the Nasdaq Composite Index rose by 166.77 points, a gain of 1.03%, to 16,366.85 points.

Arbitrage trading closures and investor concerns about a U.S. economic recession led the Chicago Board Options Exchange (CBOE) Volatility Index (VIX) to soar to 65 on Monday, the second-highest since the pandemic, surpassing the subprime crisis period. On Tuesday, the index fell back to 27, reflecting an improvement in investor sentiment.

San Francisco Federal Reserve President Mary Daly stated that the July employment report was below expectations, with the unemployment rate rising to 4.3%, triggering the Sam Rule recession indicator. Although the labor market is slowing down, it is not in free fall. She attributed the rise in the unemployment rate to an increase in labor supply, rather than permanent layoffs. Daly emphasized the need to monitor both the slowdown in the labor market and the potential recovery of inflation, and stated that it is necessary to adjust interest rates to maintain a balance between these two goals.

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Is the market correction short-term in place?

Considering seasonal factors, coupled with the potential rebound in inflation data constraining the Federal Reserve from further rate cuts, analysts generally say that it is too early to conclude that the market correction is in place.

JPMorgan Chase issued a warning that the current yen carry trade closure process is only half completed. Since the yen is still one of the most undervalued currencies, there is still room for further carry trade closures. "It's not over yet," said Alindan Sandylia, co-head of JPMorgan Chase's global foreign exchange strategy, in an interview with the media, stating that it is unlikely that the yen's carry trade will return to previous levels, and the appreciation trend of the yen is not over yet.Sandylia stated, "Due to the technical damage to portfolios caused by short-term violent fluctuations, arbitrage trading is unlikely to quickly return to the levels before the yen rebound. The best-case scenario for the market is to stabilize near the current level, with at most only a slight rebound. However, in many similar situations, the trend tends to continue, albeit at a slower pace."

Goldman Sachs analysts are relatively optimistic, believing that although the adjustment range of this round is eye-catching, it is still mild compared to the fluctuations in the market in a typical year. The Goldman Sachs analysts mentioned that recently, large-cap technology stocks have plummeted significantly, with price-to-earnings ratios falling from 32 times to 27 times, but still higher than the median of 24 times over the past decade. This indicates that despite market concerns about the timing and scale of AI investment returns, the valuation of large-cap technology stocks still reflects investors' optimistic attitude towards the prospects of AI.

In terms of individual stock trends on Tuesday, driven by the AI revenue engine, the US big data analysis company Palantir achieved profits for seven consecutive quarters, and its stock price closed up 10.38%. Palantir's earnings per share in the second quarter were $0.09, with market expectations of $0.08. Revenue grew by 27.2% year-on-year to $678.13 million, with market expectations of $653.23 million. The company also raised its second-quarter performance guidance, expecting third-quarter operating revenue to be between $697 million and $701 million, with market expectations of $680.66 million.

Thanks to strong demand for large excavators and other construction equipment, the industrial giant Caterpillar achieved growth in adjusted profits in the second quarter, and its stock price closed up 3.04%.

Nvidia rose by 3.78%, and a company spokesperson said on Tuesday that the production of its Blackwell series of products is expected to increase in the second half of this year. Previously, there were reports that Nvidia's Blackwell artificial intelligence (AI) chips would be delayed, leading to a sharp drop in the stock on Monday.

Bullish analysts on the stock say that Nvidia's strength in the artificial intelligence industry is still unparalleled, acknowledging that delayed product delivery may cause short-term fluctuations in the stock, but they remain optimistic about Nvidia's long-term prospects. New Street Research upgraded its rating on Nvidia to buy.

The ride-hailing company Uber's stock price rose by 11%, as the company's shared mobility and food delivery services demand remained stable, and both second-quarter revenue and core profits exceeded market expectations.

Walt Disney's stock price rose by 2.51%, after the company raised prices for its streaming services, with the lowest-priced ad-supported Disney+ increasing by 25% to $9.99 per month. In this adjustment, the company will add more program options for Disney+, including continuous broadcast channels. Starting from September 4th, Disney+ subscribers will be able to watch ABC News Live and preschool programs.

In terms of economic data, data released by the US Department of Commerce on Tuesday showed that the US goods and services trade deficit shrank by 2.5% month-on-month in June, to $73.1 billion, marking the first narrowing of the trade deficit in three months. Exports increased by 1.5%, while imports grew by 0.6%.

According to preliminary estimates by the US Department of Commerce, the drag on gross domestic product from goods and services trade in the second quarter was the largest since the beginning of 2022. Since last August, except for two months, the US trade deficit has expanded in all other months.The survey results from the Institute for Supply Management (ISM) indicate that trade conditions in July were mixed. After adjusting for inflation, the merchandise trade deficit narrowed to $91.4 billion in June, the smallest in three months. There was a broad increase in goods exports, including exports of commercial aircraft, natural gas, and other petroleum products, as well as motor vehicles. Imports were driven by increases in pharmaceuticals and capital goods.

In the commodity market, signs of tight supply pushed international oil prices to rebound. The futures price of West Texas Intermediate (WTI) crude oil for September delivery on the New York Mercantile Exchange rose by 26 cents, a 0.36% increase, closing at $73.20 per barrel.

International gold prices fell due to the strengthening of the US dollar and the rise in US Treasury yields. By the end of the day, the main contract of COMEX gold futures fell by $12.8 per ounce, a 0.5% decrease, to $2,431.6 per ounce.