Volatility Grips Stocks as Nvidia Rout Accelerates: Markets Wrap

(Bloomberg) — A renewed bout of volatility gripped stocks as a plunge in Nvidia Corp. raised concern that the rally in big techs — and the overall market — would be due for a breather.

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The company at the heart of the artificial-intelligence revolution plunged 12% in three days, losing more than $300 billion in value during that period. A surge in demand for AI chips briefly made Nvidia the world’s largest company last week. The firm has also become the most-expensive stock in the S&P 500 Index, with its shares trading for roughly 23 times the company’s projected sales over the next 12 months.

Following a tech-led stock rally, Deutsche Bank AG strategists led by Binky Chadha say US equities are set to pause. There is a lot of good news baked into markets at the moment, and if that optimism proves unjustified, there could be downside risks, Lori Calvasina at RBC Capital Markets noted. The market continues to want to broaden out, but still struggles to do that, she added.

“More broadly, last week saw some of the biggest inflows on record into large-cap tech/growth funds,” said Jonathan Krinsky at BTIG. “That feels like a sign of froth after the run we have had. We remain concerned about a near-term unwind of many year-to-date leaders. If the S&P 500 is going to avoid a bigger pullback into July, bulls need to see continued rotation below the surface.”

The S&P 500 hovered near 5,480, while the Nasdaq 100 underperformed major benchmarks after coming very close to the 20,000 mark last week. Nvidia sank around 6% on Monday. Treasury 10-year yields were little changed at 4.26%. Bitcoin slumped to around $61,000.

To Matt Maley at Miller Tabak, if the weakness in a few big-cap tech names that we saw late last week spills over into the rest of the group, it’s likely going to create some problems for the broad market. At least over the near-term.

“A decline in the tech sector is certainly possible, even if the tech sector is going to do well during the summer months overall, Maley noted. “Even if you agree with the most-bullish scenario for the AI phenomenon for the second half of 2024, no group moves in a straight line.”

The strategist noted that the upcoming results from Micron Technology Inc. on Wednesday could be key on that front.

To John Stoltzfus at Oppenheimer, while some near-term profit-taking should be expected, particularly in segments that have had exceptional run-ups, the bull market in the US appears sustainable as investors increase their exposures to stocks. Near-term volatility continues to present opportunities, he noted.

“The stock market is not in a bubble, and while megacap growth stock valuations are stretched, stock prices have not decoupled from fundamentals as they did during the tech bubble of 2000,” said Emily Bowersock Hill at Bowersock Capital Partners. “Right now, the market is rewarding companies for delivering strong earnings, and punishing those that do not deliver.”

Corporate Highlights:

Apple Inc.’s antitrust feud with the European Union over allegedly illegal practices on the App Store intensified as watchdogs issued a fresh warning that could lead to more fines — just months after they slapped the iPhone maker with a €1.8 billion ($1.9 billion) penalty for thwarting music-streaming rivals.
Alnylam Pharmaceuticals Inc. shares soared after its drug succeeded in treating a progressive and deadly form of heart disease, potentially opening up a new avenue for the company’s top-selling product.
GSK Plc has lost out to Pfizer Inc. on a contract to supply millions of doses of its blockbuster RSV vaccine to the UK in a setback for the local pharma giant.
Sonoco Products Co. agreed to buy Eviosys, a maker of cans and other packaging, from KPS Capital Partners for about $3.9 billion.
Eurofins Scientific SE plunged the most in more than two decades after the laboratory-testing company was targeted by Carson Block’s Muddy Waters Research.
Online fashion retailer Shein confidentially filed papers with the UK authorities for a potential listing in London, according to people familiar with the matter.
Tencent Holdings Ltd.’s Dungeon & Fighter Mobile more than doubled the sales of longstanding Chinese best-seller Honor of Kings in its first month, according to independent research, suggesting the online entertainment leader may have finally found a marquee franchise to replace aging titles.

Key events this week:

US Conference Board consumer confidence, Tuesday
Fed’s Lisa Cook, Michelle Bowman speak, Tuesday
US new home sales, Wednesday
China industrial profits, Thursday
Eurozone economic confidence, consumer confidence, Thursday
US durable goods, initial jobless claims, GDP, Thursday
Nike releases earnings, Thursday
Japan Tokyo CPI, unemployment, industrial production, Friday
US PCE inflation, spending and income, University of Michigan consumer sentiment, Friday
Fed’s Thomas Barkin speak, Friday

Some of the main moves in markets:

Stocks

The S&P 500 rose 0.3% as of 11:02 a.m. New York time
The Nasdaq 100 fell 0.4%
The Dow Jones Industrial Average rose 1%
The Stoxx Europe 600 rose 0.8%
The MSCI World Index rose 0.4%

Currencies

The Bloomberg Dollar Spot Index fell 0.2%
The euro rose 0.4% to $1.0731
The British pound rose 0.3% to $1.2688
The Japanese yen was little changed at 159.68 per dollar

Cryptocurrencies

Bitcoin fell 3.9% to $61,226.16
Ether fell 3.8% to $3,304.01

Bonds

The yield on 10-year Treasuries was little changed at 4.26%
Germany’s 10-year yield advanced two basis points to 2.43%
Britain’s 10-year yield was little changed at 4.09%

Commodities

West Texas Intermediate crude rose 0.7% to $81.30 a barrel
Spot gold rose 0.4% to $2,331.14 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Vildana Hajric, Sujata Rao, Catherine Bosley, Matthew Burgess and Jeran Wittenstein.