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Why AI Stocks Broadcom, Meta Platforms, and Intel Fell Today
Shares of most of the big names in technology and AI beneficiaries, including Broadcom (NASDAQ: AVGO), Meta Platforms (NASDAQ: META), and Intel (NASDAQ:INTC) shares were down 3.1%, 3.8% and 4.2% respectively on Thursday as of 1 p.m. ET.
Widespread declines in some AI winners can occur for a variety of reasons, such as bad news in the AI ​​investment industry or a general market pullback.
But that’s not what’s happening today. In fact, Broadcom even got a major analyst upgrade.
The reason for the declines seems to be, counterintuitively, that there was some very good economic news that came out this morning. However, with the technology sector having outperformed all others this year, investors were quick to exit this winning sector and buy other much cheaper stocks, especially those that were down. small capital letters.
A soft inflation print causes a rotation into beaten-down value stocks
This morning, the Consumer Price Index data for June was released, and it was very good news, with inflation coming in softer than expected. The year-over-year headline CPI number was 3%, down from 3.3% in May and below the expected figure of 3.1%. On an underlying basis, stripping out volatile energy and food prices, the core CPI was 3.3%, down from the previous month and also below expectations, with the lowest reading since April 2021.
But even those numbers may be higher than what Americans are actually seeing in their daily lives, since the heavily weighted housing component of the CPI is higher than average. However, the way the housing component is calculated operates with a lag. So the 5.2 percent increase in last month’s index is reflecting prior increases from a year ago or more, not the roughly 0.4 percent growth in the New Tenants Index for the first quarter, which measures real-time rent growth.
Overall, this was great news. So why would this data send tech stocks lower? Especially when many growth tech stocks tend to benefit from lower inflation and interest rates?
The reason has largely to do with the huge rally in AI tech stocks already this year. In the first half of the year, large-cap AI tech stocks were virtually the only stocks to rally, while many others, especially small-cap stocks, languished. This was due to the “sticky” inflation seen in early 2024, when the inflation rate eased in 2023 and appeared to stabilize. As you can see, Nasdaq-100 large cap index and the Russell 2000 The small-cap index had very different first half-years:
^NA100TR Chart
The small-cap stocks that make up the Russell 2000 tend to be considered more economically sensitive. This may be due to their higher risk, having to borrow at higher interest rates, or the fact that the small-cap index has a higher concentration of financial, energy, and industrial stocks, and less concentration of technology stocks than the S&P or Nasdaq large cap indices.
The story continues
So today’s inflation report appears to have reassured investors that inflation is headed back toward 2%. Meanwhile, job growth remained solid, with 206,000 jobs added in June.
More evidence of a “soft landing” means a “risk-on” trade, especially for names that trade at low multiples. So with AI tech stocks having rallied all year despite persistent inflation numbers, it looks like big investors are selling those winners and “rotating” into small caps today. As of 1 p.m. ET today, the Nasdaq was down about 1.9%, even as the Russell 2000 was up about 3.1%.
The move was enough to send Broadcom tumbling, despite the fact that Rosenblatt analyst Hans Mosesmann raised his target on the stock from $1,650 to a whopping $2,400 today, based on continued high AI-related growth. It’s worth noting that Broadcom shares will be split after the market closes tomorrow.
There may be more to do in this rotation
Although today is just one day, there may well be more room to run for this rotation. According to a recent study by JPMorgan Chase According to analysts, valuation differences between high-quality large-cap stocks and high-quality small-cap stocks have reached near record levels last seen in 1999, at the end of that tech bubble. After the dot-com bubble burst, small caps outperformed over the next decade.
So even after today’s move, now might be a good time to look at some of your favorite small-cap stocks. But for tech investors, you can also take solace in the fact that today’s drop has nothing to do with bad news surrounding the businesses of these respective companies.
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JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Randi Zuckerberg, a former chief market development officer and spokeswoman for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Billy Duberstein and/or its clients have positions in Broadcom, Intel, and Meta Platforms. The Motley Fool has positions in and recommends JPMorgan Chase and Meta Platforms. The Motley Fool recommends Broadcom and Intel and recommends the following options: long January 2025 $45 calls on Intel and short August 2024 $35 calls on Intel. The Motley Fool has a disclosure policy.
Why AI Stocks Broadcom, Meta Platforms, and Intel Fell Today was originally published by The Motley Fool
The spotlight next week will shift somewhat to the Federal Reserve’s second-quarter earnings season and monetary policy. Market watchers will be treated to results from several major names, including Dow 30 components Goldman Sachs (GS), UnitedHealth (UNH), Johnson & Johnson (JNJ) and American Express (AXP), along with streaming giant Netflix (NFLX).
The Fed will still attract some attention as investors will be eager to hear from a packed lineup of central bank speakers just before the policy meeting lockout period.
In terms of the economic calendar, after fifteen days of labor market and inflation indicators, activity data will gain momentum in the form of the latest retail sales and industrial production reports.
Earnings Highlight: Monday, July 15 – Goldman Sachs (GS) and BlackRock (Black). See the full earnings calendar.
Earnings Highlight: Tuesday, July 16 – UnitedHealth (UNH), Bank of America (BAC), Progressive (PGR), Morgan Stanley (IN), PNC Financial (PNC) and JB Hunt Transport (JBHT). See the full earnings calendar.
Earnings Highlight: Wednesday, July 17 – Johnson & Johnson (JNJ), US Bancorp (USB), Morgan Children (KMI), United Airlines (UAL) and Ally Financial (ALLY). See the full earnings calendar.
Earnings Highlight: Thursday, July 18 – Netflix (NFLX), Abbott Laboratories (ABT), Black stone (BX), Domino’s pizza (ZDP) and Taiwan Semiconductor Manufacturing (TSM). See the full earnings calendar.
Earnings Highlight: Friday, July 19 – American Express (AXP), Halliburton (THANKS) and Travelers (VRT (return to recoverable value)) See the full earnings calendar.
IPO Observation: Hospital and healthcare clinic operator Ardent Health Partners (TARDT), insurance service provider Twfg (TWFG) and the biotechnology company Lirum Therapeutics (LRTX) are expected to price their IPOs and begin trading next week. The analyst quiet period ends at Rectitude (RECT) to free up analysts to publish ratings.
Police cars outside the residence of Thomas Matthew Crooks, the suspected shooter at a Trump rally on Saturday, investigate the area in Pennsylvania. Following the incident, one rally attendee was killed, two rally attendees are in critical condition and Donald Trump suffered a non-fatal gunshot wound. The shooter is dead after being shot dead by the United States Secret Service. (Photo by Kyle Mazza/Anadolu via Getty Images)
Investors will initially favor traditional safe-haven assets and may lean toward trades more closely tied to former President Donald Trump’s chances of winning the White House after he survived an assassination attempt, according to market watchers.
“There will undoubtedly be some protectionist or safe-haven flows into Asia early this morning,” said Nick Twidale, chief market analyst at ATFX Global Markets. “I suspect gold could test all-time highs, we’ll see the yen being bought and the dollar, and flows into Treasuries as well.”
Early market commentary suggested Trump’s shooting at a rally in Pennsylvania on Saturday could also prompt traders to increase his likelihood of success in the November election. His support for looser fiscal policy and higher tariffs is generally seen as likely to benefit the dollar and weaken Treasuries.
An indicator of market sentiment heading into the weekend: Bitcoin surged above $60,000, likely reflecting Trump’s pro-crypto stance.
Other assets positively linked to the so-called Trump trade include stocks of energy companies, private prisons, credit card companies and health insurers.
Traders will also be closely watching market measures of expected volatility on Monday, such as those in the tariff-sensitive Chinese yuan and Mexican peso, which have begun to price in the U.S. vote.
Trump said he was shot in the right ear after a shooting at his rally. His campaign said in a statement that he was “fine” after the incident, which prompted him to rush off the stage.
“Currencies will be the first major market on Monday in Asia to react to the weekend’s shots. There’s potential for extra volatility, and getting a clear reading could be especially difficult because liquidity will be hurt by Japan’s national holiday,” said Garfield Reynolds, Asia team leader for Bloomberg Markets Live.
Strategists had already expected a volatile run-up to the election, particularly as Democrats are still agonizing over President Joe Biden’s candidacy after his poor performance in last month’s debate raised questions about his age. Investors were also grappling with the possibility that the election could end in a drawn-out dispute or political violence.
But there is little precedent for events like those in Pennsylvania. When President Ronald Reagan was shot four decades ago, the stock market plunged before closing early. The next day, March 31, 1981, the S&P 500 rose more than 1% and benchmark 10-year Treasury yields fell 9 basis points to 13.13%, according to data compiled by Bloomberg.
Bond investors should pay particular attention as the attack is likely to boost Trump’s election chances and ultimately lead to concerns about the fiscal outlook, according to Marko Papic, chief strategist at California-based BCA Research Inc.
“The bond market must at some point become aware of President Trump’s greater chances of winning the White House than any of his rivals,” Papic wrote. “And I continue to believe that as his chances increase, so too must the likelihood of a bond market revolt.”
Kyle Rodda, senior financial markets analyst at Capital.com, said he was seeing client flows into Bitcoin and gold following the shooting.
“This news marks a turning point in American policy norms,” he said. “For markets, it means safe-haven trades, but more tilted toward non-traditional safe-havens.”
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Latest news on July 11, 2024: Airtel says its new Xstream Fiber plans bundle over 350 live TV channels (Official Photo) (Reuters) Disclaimer: This is an AI-generated live blog and has not been edited by Hindustan Times staff.
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Jio Financial share price: Should you buy this Reliance group stock on Monday ahead of Q1 FY2024 results?
Q1 2024 Results: Jio Financial Share Price will be in focus on Monday as the Reliance Group company has a fixed board meeting on July 15, 2024 to consider and approve the company’s unaudited standalone and consolidated financial results. Trust Group company informed about the Q1 2024 Results date on Wednesday last week via an exchange filing. According to stock market experts, Jio Financial Services Limited is poised to deliver impressive Q1 results for FY25 on solid operating income. They have forecast a healthy QoQ PAT for the company in Q1 FY25.
Jio Financial Services News
Speaking on the Jio Financial Services Q1 2024 results, Manish Chowdhury, Head of Research, StoxBox, said, “We believe Jio Financial Services is poised to deliver impressive results in Q1FY25 aided by its operating income, which is likely to show robust growth driven by strong investment income, which in turn should lead to healthy PAT growth on a sequential basis. Jio Financial Services continues to make strategic moves such as launching digital products and expanding its ecosystem, with a clear focus on future growth. The company has announced plans to introduce products for lending against stocks and mutual funds, leveraging Jio’s large user base, which could be a significant growth driver in the coming quarters.”
“Furthermore, with the NBFC receiving RBI approval to become a primary investment company, Jio Financial Services is well-positioned to unlock value from its investments. Overall, we expect the company to report robust numbers in the upcoming quarter,” the StoxBox expert added.
Jio Financial Stock Target Price
Speaking about the technical outlook of Jio Financial share price, Ganesh Dongre, Senior Manager, Technical Research at Anand Rathi, said, “Jio Financial Services share price is poised to make a fresh high at the ₹260 apiece level. If the stock breaks above this mark, the Reliance Group stock could make a fresh high by touching the ₹290-₹295 zone. Hence, those with Jio Finance stock in their portfolio are advised to stick to the script by keeping a stop loss at ₹205. If the stock breaks above ₹260 decisively, then one can upgrade the stop loss at ₹240 for the near-term target of ₹295.”
On the advice to new buyers regarding Jio Financial stock, Ganesh Dongre said, “New buyers are advised to wait for the breakout. Once the stock breaks above â‚ą260, one can buy this Reliance Group stock at the short term target of â‚ą295, keeping a stop loss of â‚ą240 apiece.”
Disclaimer: The views and recommendations made above are those of individual analysts or brokerage firms, and not of Mint. Investors are advised to consult with certified experts before making any investment decisions.
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