Bitcoin
Nvidia’s half-trillion hiccup; Bitcoin, China slides
A Day Ahead View in US and Global Markets by Mike Dolan
In a glimpse of how the megacap tails wag the dog, a nearly half-trillion-dollar shift in the market capitalization of AI leader Nvidia in just one week continued to affect the entire market, even though most stocks in the S&P500 ended higher on Monday.
Without any obvious trigger other than a jittery earnings spree at the end of Friday’s half-year, Nvidia has retreated nearly 20% from last Thursday’s record high – shaving more than $430 billion off its market value in the process.
But it’s only back to where it was two weeks ago – although it remains in the red again before Tuesday’s bell.
While the AI champion chip giant remains up nearly 140% year-to-date, the sheer scale of the stock and the extent of the shakeout are a blow to index investors.
The tech-heavy Nasdaq predictably lost more than 1% on Monday. The blue chip Dow Jones Industrial Average, on the other hand, rose to a one-month high.
But while about 70% of S&P500 stocks finished higher and the equal-weighted S&P rose 0.5%, the overall index finished 0.3% in the red.
Beyond Wall Street, the impact of Nvidia’s wild swings is equally surprising.
Société Générale strategist Andrew Lapthorne points out that before this week’s shakeout, Nvidia alone was responsible for about 300 basis points of the year-to-date gain of almost 12% in the MSCI World index – surprising because that index contains almost 1,500 of the largest companies.
But while Nvidia’s pullback seemed like a lone hiccup, it coincided with a sharp reversal in Bitcoin this week. Before the emergence of generative AI more than a year ago, Nvidia had long been driven by the crypto boom and the two areas may still be united to some extent.
While it recovered somewhat on Tuesday, Bitcoin also plummeted on Monday and recorded a drop of more than 7% from peak to trough in just over two weeks.
A reversal of money from newly formed exchange-traded funds mid-year? Again, it’s far from clear.
The other alarming reversal of the moment is mainland Chinese stocks, which fell once again on Tuesday and have now almost erased all of the year’s gains.
Partly hit by the Nvidia-led chip swing, the CSI300 lost 0.5% and semiconductor stocks traded on the onshore market fell 4%.
But, hampered by its own housing crisis and a brewing trade war with G7 powers, China has other problems.
The latest geopolitical blow overnight came with news that the Biden administration is investigating Chinese telecommunications companies over concerns they could exploit access to American data through their U.S. cloud and internet businesses by providing it to Beijing .
The story continues
Elsewhere, markets were quite stable.
U.S. Treasuries and the dollar remained little changed on Tuesday morning. June readings on U.S. consumer confidence and an auction of about $69 billion in two-year notes top the agenda later.
With politics dominating next week’s horizon in the United States and Europe, European markets were a little disoriented.
French government debt yields and spreads have moderated, largely following relatively benign fiscal policy signals from senior far-right officials leading opinion polls ahead of the first round of French parliamentary elections over the weekend.
Key developments expected to provide further guidance to US markets later on Tuesday:
* US consumer confidence in June, Richmond Fed business survey in June, Dallas Fed services survey in June, Chicago Fed business survey in May, US home prices in April; May inflation in Canada
*Federal Reserve Governor Michelle Bowman and Fed Governor Lisa Cook speak
* US Treasury sells $69 billion in 2-year notes
* US Corporate Profits: FedEx, Juniper, Progress Software
(Reporting by Mike Dolan, Editing by Timothy Heritage mike.dolan@thomsonreuters.com)