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NEWS
Imagine Betting Against Big Tech?

A cooling labor market is easing the upward pressure on interest rates, helping risk assets like tech stocks soar to new all-time highs. Traders continue to anticipate a crypto breakout, while others await a catalyst like the approval and roll-out of spot Ethereum ETFs. Let’s see what else you missed. 👀

Today's issue covers Nvidia joining the $3 trillion market cap club, why Lululemon’s problems are not black and white, and the Wall Street titans looking to form a new stock exchange. 📰

Here's today's heat map:

8 of 11 sectors closed green. Tech (+2.22%) led, & utilities (-0.57%) lagged. 💚

The Bank of Canada is the first G-7 country to begin its interest rate easing cycle, cutting 25 bps to 4.75%, forecasting more cuts as inflation continues to ease. ✂️

Crude oil and other energy commodities rebounded despite the U.S. Energy Information (EIA) report signaling a rise in inventories last week. Still, prices remain in a downtrend, with many expecting downside to continue. 🛢️

After briefly dipping into contraction territory during April, the ISM services sector PMI rebounded into expansion territory during May. Notably, the employment index contracted further, reiterating a softening labor market. 🔺

GameStop shares rose 19% as short seller Andrew Left bet against the “cult stock,” though with a smaller position to avoid being burned like in 2021. 🎮

Dollar Tree shares fell 5% after meeting first-quarter expectations. It’s exploring the sale of its Family Dollar brand, given the grocery-focused brand has struggled with rising costs and lower-income consumer trends. Discount retailer Five Below also shed 15% on disappointing revenue guidance. 💵

Software company WalkMe jumped 43% on the news SAP would acquire it in a $1.50 billion all-cash deal. Clothing company Hanesbrands also rose 15% after reaching a deal to sell its global Champion business to Authentic Brands. 🤝

Other active symbols: $AMC (+7.52%), $NVAX (+18.07%), $MNDR (+46.29%), $HOLO (-15.66%), $LPA (-82.86%), & $CCM (-46.19%). 🔥

Here are the closing prices: 

STOCKS
Nvidia Joins The Exclusive $3 Trillion Club

The ADP Employment report signaled that private payroll growth slowed further in May, reducing upward pressure on inflation and odds of rate cuts in the back half of 2024. 👍

This boosted the bond rebound further, providing a tailwind for risk assets…which technology stocks happily responded to.

Nvidia led the semiconductor surge today, rising 5% and achieving a feat only Apple and Microsoft have been able to achieve…a $3 trillion market cap. It also narrowly closed above Apple, making it the second-largest company in the world. 🤩

We’ve heard for years that these “Magnificent Seven,” or whatever we’re calling the largest U.S. tech stocks now, cannot grow further. Slowing growth, stretched valuations, regulatory risk, industry disruption, etc. have all remained risks, yet investors and traders continue to pile into these stocks.

The bull explanation for this seemingly irrational behavior is that each of these companies is a collection of dozens and dozens of smaller companies inside it, with strong core businesses funding moonshot bets in the hottest sectors like AI, electric/autonomous vehicles, augmented reality, etc. 🐂

The bear case relies heavily on the argument that systematic fund flows into “passive” investment funds like the S&P 500, which overweight the largest stocks in the world, are responsible for these unsustainable gains and not these companies’ fundamentals. 🐻

Who will ultimately be right will only be known in hindsight. But for now, it's hard to look at the top 10 market cap companies globally and conclude that it’s smart to bet against big tech without a clear catalyst to change this persistently strong trend.

Congrats to Nvidia on the milestone. We’ll see if it comes in hot tomorrow to try and knock Microsoft down from its #1 spot. 👑

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