Last week, the three major U.S. stock indexes continued their early gains, with the S&P 500 index breaking through the 5,000-point mark and hitting a record high. The Nasdaq index also exceeded 16,000 points during the session, which is one step away from the all-time high of 16,212 points set in November 2021. Although the U.S. stock market is trending well, it is still affected by negative factors such as the performance divergence of listed companies. The trend of the U.S. stock market is still subject to many controversies.
U.S. stocks continue to be strong, Chinese assets perform well
Last week, the Dow Jones rose slightly, the S&P 500 rose 1.37%, and the Nasdaq rose 2.31%. The performance of Chinese asset targets is eye-catching. The Nasdaq China Golden Dragon Index rose by more than 5%, far outperforming the three major U.S. stock indexes. The FTSE China A50 Futures Index set its largest weekly increase since the end of July 2023.
Large technology stocks still led the market higher.
The six major technology stocks of FAAANM (Facebook, Amazon, Apple, Alphabet, NVIDIA, Microsoft) performed well. Among them, Nvidia rose 9.03% last week, its market value increased by US$147.5 billion, and its total market value is close to Amazon. Alphabet, the parent company of Google, rose 4.65% last week, increasing its market value by approximately US$82.6 billion.
The trend in large-cap technology stocks stemmed from the company’s recent quarterly earnings that beat expectations.
Performance differentiation of listed companies
But not all listed companies perform as well as large technology companies, which has also caused the trend of U.S. stocks to begin to diverge.
According to Bloomberg News, as of Friday afternoon local time, about 80% of the companies in the S&P 500 index had better-than-expected performance growth in the fourth quarter of last year, easily exceeding the 10-year average of 74%. Among them, energy, information technology and consumer goods sectors performed best.
In addition, the proportion of constituent stocks in the small-cap benchmark Russell 2000 index that suffered losses in the fourth quarter of last year was close to 38%, the highest level since 2019. Currently, about 30% of the index’s component companies have announced financial reports.
It is worth noting that the Russell 2000 Index underperformed the S&P 500 Index in January, setting a record since March 2020. This shows that while large U.S. companies are making a lot of money, small and medium-sized companies are making huge profits. face greater difficulties.
Regional banking crisis shows no signs of easing, Yellen tries to reassure markets
Investors’ concerns about U.S. stocks also include the resurgence of regional banking crises.
The bank’s performance in the fourth quarter of last year was significantly lower than market expectations and it reduced dividends, causing the market to worry about its credit assets. New York Community Bank continued its decline last week by 18.87%, following a 42% drop for the week. New York Community Bank has pledged it has enough deposits to stay afloat after a series of stock losses. In addition, the bank also took measures such as replacing senior executives to stabilize market sentiment. But panic continues to spread. Ratings agency Moody’s has downgraded New York Community Bank’s credit rating to junk status.
In fact, this crisis is not limited to the United States. Banks in other regions may also be deeply involved.
Last Wednesday, Germany’s Deutsche Pfandbriefbank (PBB), which specializes in real estate investment, said in a statement that it had increased its loan loss provisions in the fourth quarter of 2023, bringing the total provisions for the year to 215 million euros ($231.7 million). in response to the weakening U.S. housing market. The bank pointed out that despite the increase in provisions, its financial strength remains strong and the bank remains profitable. However, PBB described this commercial real estate risk as the most serious real estate crisis since the financial crisis. The bank’s stock fell 18% last week.
This is the second German bank to issue a warning in two weeks. Previously, Germany’s largest bank, Deutsche Bank, announced that it had increased provisions by 123 million euros in the fourth quarter of last year to absorb possible losses caused by U.S. commercial real estate. This is equivalent to four times the amount set aside in the same quarter the previous year. Deutsche Bank’s shares listed on the Frankfurt Exchange have fallen 10% in the past week and have fallen 25% so far this year.
Separately, Japan’s Aozora Bank said bad loans tied to its U.S. offices caused it to swing from profit to loss in the quarter. Swiss private bank Julius Baer also said it lost about $680 million because of an uncollectible loan to a European conglomerate, causing its annual profit to drop 55%. According to analysis, the company is an Austrian company engaged in real estate development.
Other institutions have begun to sell off commercial real estate. The Canadian Public Pension Investment Board recently sold a 29% stake in a Manhattan office building for $1. It is reported that the fund’s investment in the property here was as high as $71 million.
But senior U.S. financial officials also warned the market.
U.S. Treasury Secretary Yellen said last week that U.S. regulators are paying attention to the risks of non-bank mortgage lenders and that if the market encounters high pressure, one of these institutions may fail. “The Financial Stability Oversight Committee is very concerned about this because non-bank mortgage companies can’t take deposits and banks can,” Yellen told the Senate Banking Committee on Thursday. Nonbanks have become major players in the mortgage market, but they rely primarily on short-term loan financing facilities to fund their operations and do not have access to the Federal Reserve’s emergency lending facility, known as the discount window.
But at the same time, Yellen is also trying her best to reassure the market. At last Thursday’s hearing, Yellen emphasized that the risk exposure of large banks is “pretty low,” but there may be smaller banks that are facing pressures related to high office vacancies, rising interest rates, and falling valuations.
“For some banks, this will be a significant concern, but overall, the capital position of the entire financial system is good. Overall, the U.S. financial system is healthy.” Yellen said.