Big Rally in Big Tech Takes a Breather
Some troubling consumer data points.
Key Takeaways
SOX Rally Snaps After Massive Surge: There was a first yesterday in an otherwise ho-hum session. For the first time in eighteen trading days, the SOX index closed with a loss. But not before the bellwether semiconductor composite surged +47% from the late-March trough.
Big Tech Earnings Face High Expectations: With five of the Magnificent Seven stocks set to report results this week, and up +20% in the past four weeks, a lot is riding on the profits, sales, and guidance to come out of the results. The bar has been set high. At the same time, one can legitimately ask what sort of rally this actually has been, because recent trading volume has been exceptionally light (last week for the S&P 500, it was the lowest since COVID-19), which smacks of acute short-covering and position adjustments. More of that, it seems, than fresh capital coming to the fore.
Consumer Stocks Show Weakness: The rally in Consumer Discretionary stocks ended with the group falling around -4% shy of its early-year peak, and Consumer Staples off more than -7% from its pre-war level. Yesterday was not just renowned for Nvidia and Alphabet nudging up to fresh records, but shares of Domino’s Pizza tumbled -8.8% to a three-year low on the back of some dismal same-store sales growth numbers and squishy-soft guidance. The problems didn’t stop there, because Dollar Tree dropped -5.5%, Ulta Beauty fell -3.4%, while Taco Bell parent, Yum Brands, slid -3.2%. So, for whatever reason, the onset of a consumer recession is evident everywhere except for the Commerce Department’s retail sales data.
