Things you need to know
- Stocks start the month on a plus tick.
- NVDA again stuns the crowd – Agentic AI is here.
- All the systems set to ‘GO’.
- Oil up, bonds down, gold thrashes around.
- Try the Pasta alla Gricia
June kicked off the way May ended — at the highs and TECH was still at the center of the action….. At the end of the day – this is how the scoreboard looked. The Dow tacked on 46 pts, the S&P added 20 pts, the Nasdaq – it gained 114 pts and pushed its way thru another century – 27,000, the Russell lost 14 pts, the Transports continue to push higher – adding 120 pts, the Equal Weight S&P added 19 pts while the Mag 7 lagged – falling 375 pts or just over 1%.
NVDA did the heavy lifting – jumping more than 6% after Jensen unveiled a ‘new’ chip built for the PC market, a chip that is supposed to take the old-line machines into ‘the age of AI.’
Speaking at Computex in Taipei, Jensen laid out what may be the next chapter of the AI revolution. The first wave of AI taught machines how to create content. The next wave – Agentic AI- will teach machines how to perform tasks, make decisions, and execute workflows.
In plain English? AI is moving from being a digital assistant to becoming a digital worker. I mean think about how you use AI today. You ask it a question. It gives you an answer. It writes an email, summarizes a document, or helps create a presentation. Now imagine AI doing all of it on its own. Researching the topic. Gathering the data. Building the presentation. Scheduling the meeting. Sending the invitations. Following up afterward.
And if that becomes reality, then the investment opportunity extends far beyond Nvidia – we have been discussing this very point – think the veins, arteries and systems, because every AI agent requires computing power, memory, networking, storage, electricity, cooling, and software. So, If NVDA is the heart, those sectors are the systems that will ‘keep the body alive’.
That’s why the next phase of the AI trade will be about owning the ecosystem (we have been discussing this) that allows millions of digital workers to function every day. So, you need to think about optical connectivity, memory and storage, cloud infrastructure, data centers, utilities, power management, cooling systems, software automation, and semiconductors.
The reaction was instantaneous – MRVL + 7%, MU + 6.6%, AVGO + 3%, Dell ripped higher gaining 10%, HP +8%, ARM +15%.
Now, remember yesterday we discussed breadth and how it is important…well, yesterday’s action should give you some pause – forcing you to stop and think before getting FOMO’ized – because while the Dow, S&P and Nasdaq hit new records – the majority of the ‘participants’ closed lower.
Of the 11 S&P sectors – only Tech & Energy closed higher – up 2.5% and 1.8% respectively….…..which means 9 sectors lost ground….Utilities the biggest loser – down 3%, Consumer Discretionary lost 2.25%, Real Estate lost 1.6%, Consumer Staples and Healthcare lost 1%, Basic Materials gave up 0.5%, Financials gave up 0.3% while Communications lost 0.1%.
Down the chain – we saw more weakness in Retailers, Airlines, Disruptive Tech, Value Names, Aerospace & Defense, Big Pharma, Biotech….
Most anything tech gained ground, Semi’s, Software +6%, Cybersecurity up 5.7%, Robotics and AI + 1.1%, Quantum Computing + 2%…
On the geo-political front – it was more of the same – we have a deal, we don’t have deal, Iran wants to talk, Iran doesn’t want to talk, we have a ceasefire and we don’t really have a ceasefire….. Early yesterday, Iran said it would suspend talks in protest over Israel’s offensive in Lebanon — and threatened a COMPLETE closure of the Strait of Hormuz. Oil then spikes, markets dip, bonds sell off, yields rise and then Trump tells us that ‘talks are continuing at a rapid pace,’ And then like clockwork – Israel and Hezbollah agreed not to attack each other. Crude falls, treasuries bounced off the lows while the indexes closed higher leaving many stocks closing lower.
In the end – remember – expectations remain ‘fluid’, strikes and conflicting statements will continue as details remain unresolved, and the Strait stays closed. Oil prices will keep driving the narrative while investors assess and digest the eco data. The latest? Trump says a deal could be completed by next week…..blah, blah, blah.
Speaking of eco data – the ISM Manufacturing index expanded in May at the FASTEST pace in four years – coming in at 54 – above last month and above the estimate. Sounds great, right? Not so fast big boy – read the fine print. The prices-paid gauge while a bit lower – remains at elevated levels – meaning material costs climbed for producers. (think the weakness in Basic Materials)- So, Hot growth. Sticky input prices. And crude up 5.8% or $5 didn’t help the broader market.
Put it together and the chatter is no longer about WHEN the Fed cuts. It’s whether the next move is a HIKE. Another topic that we have been discussing – so that should come as no surprise. For now, the futures markets are NOT pricing in any rate cuts this year, but nor are they pricing in any definite hike – so the narrative also remains ‘fluid’.
Bonds lost ground – the TLT and TLH both down 0.3% and 0.4% respectively and that sent yields just a bit higher…the 2 yr ended the day yielding 4.03%, the 10 yr at 4.44% while the 30 yr topped out at 4.96% – both the 10 and 30’s just below the ‘key’ level while the 2 yr is once again in the danger zone.
Gold continues to thrash around….yesterday it was down $55 and this morning it is up $45…it remains stuck in what is now becoming a tighter triangle pattern – with long term support at $4,410 rising and short term resistance at $4,630 falling (forming the triangle) – at some point – it is either going to break down or surge higher….There is no third option……
There’s a piece in the FT detailing how gold has now overtaken US Treasuries as the largest reserve asset held by the world’s central banks – gold holdings approaching $4 trillion, edging out the roughly $3.9 trillion in Treasuries. The last time that happened? 1996. Thirty years ago. Should it surprise anyone? NO! We’ve watched it in real time, central banks have been buying gold for three straight years, (another detail we have been discussing) gold up over 130% since the start of 2024 while central bankers backed up the truck.
Today brings the JOLTS Job Openings. Openings to remain unchanged, quits rate – unchanged, layoff rates – unchanged…..Tomorrow gives us ADP Employment – and is expected to show an increase of 118k new jobs while the ISM Services index is expected to come in just north of the neutral line in the expansion zone. Thursday delivers Weekly Jobless Claims and Productivity.
European markets are higher – nothing more than just some back and forth as investors, traders and algo’s react to the headlines.
US futures are lower….. Dow futures -200, S&P’s -16 pts, the Nasdaq -45 while the Russell is -4.
Anthropic announces that they too have filed to go public…..they are valuing themselves at $1 trillion+…. it’s nuts…. but not unexpected…. Now we will wait for Open AI to announce to finish the ‘trinity’. Recall, SpaceX is going public on the 12th…..the road show starts on Thursday, book building starts on Friday, Pricing on the 11th and the splash on the 12th.
The S&P closed at 7,599 – up 19 pts after trading as high as 7,617. The ‘weakness’ this morning makes sense, in fact, I have been expecting more weakness than we’ve seen…..I remain a bit cautious, which doesn’t mean I would not put money to work, it just means I would just put it to work in sectors that are not stretched….Tech is stretched – at the moment Capisce? Which doesn’t mean I am selling it, I am not.
Recall, yesterday and last week I said that RSIs across the indexes remain near or are kissing the overbot line and the continue to remain there and that is a caution flag. Either way – eventually there will be a pullback, markets will rotate and consolidate, in fact you want to see that happen after the dramatic moves we have seen.
Give me a call to discuss your goals and your timeline. Let’s assess the risk in your portfolio and your tolerance for volatility — give me a call at 561-931-0190. Happy to do a complimentary portfolio review and risk assessment.
Take good care,
Kp
[email protected]
Source: Bloomberg, CNBC, Reuters, Wall Street Journal
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Pasta alla Gricia
This is a classic Roman dish…. made with 4 ingredients.
You need: Guanciale, Pecorino Romano, pepper and the pasta – Spaghetti.
Bring a pot of salted water to a rolling boil.
In a large sauté pan – add the sliced/chopped Guanciale…. cook until crispy, rendering the fat…. Remove the guanciale, leave the fat.
Add the spaghetti to the pot of water…cook until aldente – 8 mins or so.
While that is happening. Add some of the fat to a bowl – add the Pecorino and mix to form a paste.
Now – toast the black pepper in a pan and then set aside.
Now – add in one ladle of the pasta water to the sauté pan with the guanciale fat. Toss in the toasted black pepper. Now add the cooked pasta to the pan and toss to coat.
Now add in the Pecorino Cheese mix – and stir to combine. Add a ladle of pasta water to emulsify and create a creamy dish.
Buon Appetito