Stock market, seismic swarm on the markets. Tech down, United Airlines and LVMH run
The rebound attempt quickly ran out of gas. There have now been four consecutive sessions of corrections for the main US index, the first time in 2024, with the drawdown now settling at -4.42% and with the same index trading below its moving average at 50 periods. Unlike previous corrections, in yesterday’s session, Treasury yields showed a decline, as did the dollar, which after five sessions of increases, lost 0.50% in yesterday’s session, despite having gained around 4 .43% since the beginning of the year.
The S&P 500 struggled to attract investors in April, falling 4.4% after rallying more than 10% in the first quarter. All sectors posted losses, from energy (ETF XLE) down 0.3% to real estate (XLRE) which lost 9.6%.
Investment grade bonds, represented by the Bloomberg US Aggregate Bond Index, have shown a disappointing performance, falling nearly 2% since the beginning of the month. Higher-than-expected inflation in the U.S. pushed the 10-year Treasury yield higher by about 0.36 percentage points, negatively impacting both stocks and bonds. Elevated geopolitical risks have also reduced risk appetite in recent days, but it’s important to remember that market pullbacks are normal, with the S&P 500 averaging three 5% retracements each year.
In yesterday’s session, global stocks showed a negative trend, with US technology and growth stocks leading the decline, while the banking and value sectors performed relatively better on both sides of the Atlantic. This dynamic reflects a variety of macroeconomic factors, bond yields, monetary policies, and changes in company valuations and earnings. In the United States, the decline has been particularly marked in the technology sectors, where valuations are high, and real estate, characterized by high levels of debt. Instead, defensive sectors such as utilities and consumer staples posted gains. Currently, only 30% of stocks are trading above their 50-day moving average. Significant in yesterday’s session was Nvidia’s 3.9% decline, which resulted in a loss of $83 billion in market value for the chip giant, or represented nearly a third of yesterday’s total loss of the S&P 500 index, as measured by the SPY ETF. The stock is now trading at over -11% from its previous highs, but still at +70% since the beginning of the year. This decline came following a disappointing earnings report from ASML Holding which saw a 7.1% decrease in its value.
Altrove a Wall Street, United Airlines recorded an impressive 17.5% jump, the biggest daily gain since late 2020 and the second-best post-release result ever after June 2008’s +68%.
This rise was supported by better-than-expected financial results, with the airline reporting a loss per share of just 15 cents for the first quarter, lower than analysts expected. Additionally, revenues of $12.5 billion also exceeded expectations. United Airlines also offered a positive outlook for the second quarter and full year, anticipating a continued recovery in post-pandemic air travel demand and strong growth in international travel. The airline is also well positioned to take advantage of the industry’s limited capacity, exacerbated by the grounding of Boeing 737 MAX 9 aircraft. The stock is currently followed by 21 analysts, with 17 recommending buy and 4 holding a position neutral; no one suggests selling. Analysts predict a 30% appreciation potential from the current price, with an average 12-month target set at $62.46.
The trading session in Europe was instead positive, supported by a promising start to the quarterly reporting season. Luxury giant LVMH rose 4.5% as first-quarter revenues slowed less than expected, demonstrating remarkable resilience despite weak consumer confidence in key Asian markets. This result also had a positive effect on Hermes, which saw an increase of more than 3%. Brunello Cucinelli also presented encouraging results, dispelling uncertainties about the luxury sector. Finally, Adidas recorded a surge of 8%, thanks to excellent results which led to an update of the forecasts for the future.
*Analysis by Gabriel Debach, market analyst at eToro