Reads
- China Signals More Economic Aid After Property Debt Relief
- America’s Biggest Banks Are Going to Need More Capital
- Gensler Asserts SEC Authority Over Crypto as Opponents Waver
- CLO Market Set for $20 Billion Reset Spree in Sign of Thawing
- Short Seller Andrew Left Is Living in Fear of the Feds
- Americans Prepare for Tighter Budgets as Student Loan Payments Resume
- No, ‘Socialism’ Isn’t Making Americans Lazy
- The Next Challengers Joining Nvidia in the AI Chip Revolution
- Jeff Bezos and Bob Iger Top Sun Valley List, With AI and Streaming in Focus
- The Rapid Rise of Threads Appears to Be Hurting Twitter
- iQuit: My Hellish Attempt to Leave Apple’s Walled Garden
- A Tiny Fish That Fuels an Atlantic Ecosystem Now Fuels Industry Debates
- Facing a Battle for Armored Steel, This Tank Maker Bought the Factory
- At Auction, American Cars Are Often Not Valued as Highly as their European Counterparts
- PGA Tour Will Tout Minimal Saudi Influence in Golf Merger at Congressional Hearing
Todays Open Interest Change
PREMIUM
Prepper
They were once called the FAANGs, and then MAMAA stocks, before evolving into the Magnificent Seven. But whatever Mad Money's Jim Cramer wants to call it, the group's outsized influence is starting to cause some trouble for market indices. Following a return of the tech trade and a major rally in 2023 helped by the AI craze, some of the financial world's benchmarks are now upending diversification rules, resulting in profound impacts for countless investing products and the hundreds of billions of dollars that are linked to them.
Snapshot: The Nasdaq 100 (NDX), the go-to index for prominent growth-oriented stocks, has surged nearly 40% YTD, compared to the 15% gain of the S&P 500. The power behind the bull market that resumed in March is being led by the Magnificent Seven and their stellar performance in 2023: Alphabet (GOOGL) +31%, Microsoft (MSFT) +39%, Amazon (AMZN) +48%, Apple (AAPL) +51%, Meta (META) +136%, Tesla (TSLA) +149% and Nvidia (NVDA) +195%. Putting things in perspective, without the big gains of the gunslinging gang, the S&P 500 would be slightly underwater for the year. "Overconcentration" is even present in the Nasdaq 100 (NDX), which revels in these types of heavyweight stocks, forcing the index provider to pull the trigger.
Unlike a reconstitution, where stocks are removed or added, a rebalancing changes the weights of an index and their stock component percentages. The Nasdaq has only conducted a special rebalance twice in the past - in December 1998 and May 2011. The rules state that action will be taken if the aggregate total of all stocks with individual weights above 4.5% in the index exceeds 48% (currently, the "Magnificent Seven" stocks account for 55% of the total weighting of the Nasdaq 100). Apple exceeds $3T market cap as analysts heap praise on tech giant.
What to watch: Rebalancing changes will be announced on July 14 and take effect before the market opens on July 24. Keep an eye on ETFs like the Invesco QQQ Trust (NASDAQ:QQQ), Invesco NASDAQ 100 (NASDAQ:QQQM) and the ProShares UltraPro QQQ ETF (NASDAQ:TQQQ), as well as positioning that could occur beforehand. SA analysts like Jim Sloan also explore if The Leadership Of The Magnificent Seven Makes Sense by comparing value vs. growth dynamics, while UFD Capital urges investors to take the long-term perspective despite bubble fears over artificial intelligence.
Sweden is one step closer to joining NATO after Turkey backed its bid to become a part of the alliance. President Recep Tayyip Erdogan committed to forward Sweden's accession protocol to Parliament "as soon as possible" for ratification amid commitments by Stockholm to bolster its anti-terrorism efforts and support Ankara's bid to join the EU. Following Turkey's decision, the U.S. is expected to transfer F-16 fighter jets produced by Lockheed Martin (LMT), though the decision will need approval from Congress. Investing Group Leader Leo Nelissen sees the growing momentum of the F-16 program, which has benefited from war-related uncertainties, further contributing to Lockheed's positive trajectory.
Meta's (META) Threads is off to a fast start, crossing 100M users less than a week after its launch as it quickly catches up to Twitter's roughly 240M daily active users. The figure excludes Europe, where Threads has not yet launched due to data regulation concerns. "That's mostly organic demand and we haven't even turned on many promotions yet," said Meta CEO Mark Zuckerberg in a post. Evercore ISI also believes Threads presents a significant revenue opportunity over the next few years, adding that "Twitter’s turbulent execution has opened up an opportunity for a competitor app." (32 comments)
Fed Vice Chair for Supervision Michael Barr has laid out a set of proposals to address recent bank failures and to bolster the financial system with stronger capital requirements. His plans include updating standards for risk-based requirements for big lenders and improving bank stress testing. "These changes would increase capital requirements overall, but I want to emphasize that they would principally raise capital requirements for the largest, most complex banks," said Barr. "I expect to have more to say on these topics in the coming months." In the Fed's 2023 stress test, all 23 banks met minimum capital requirements under a hypothetical recession, confirming "that the banking system remains strong and resilient." (2 comments)
Today's Markets
In Asia, Japan flat. Hong Kong +1%. China +0.6%. India +0.4%.
In Europe, at midday, London -0.1%. Paris +1%. Frankfurt +0.4%.
Futures at 7:00, Dow flat. S&P +0.1%. Nasdaq +0.1%. Crude +0.5% to $73.38. Gold +0.5% to $1,940.50. Bitcoin +0.7% to $30,403.
Ten-year Treasury Yield -4 bps to 3.97%.
Today's Economic Calendar
6:00 NFIB Small Business Optimism Index
1:00 PM Results of $40B, 3-Year Note Auction
Companies reporting earnings today »
What else is happening...
WSB survey results: Wait for war's end for Ukraine NATO membership.
Berkshire (BRK.A) to buy Dominion (D) stake in LNG plant for $3.3B.
Apple (AAPL) supplier Foxconn (OTCPK:HNHPF) exits Indian chip deal.
Rite Aid (RAD) dips as it weighs bankruptcy to address opioid liabilities.
Icahn Enterprises (IEP) jumps after Carl Icahn renegotiates personal loans.
Cava (CAVA) keeps rising; analysts see plenty of space for more growth.
Novo Nordisk (NVO) weight loss drugs under EU scrutiny over suicide risk.
Activision (ATVI) on watch ahead of ruling in Microsoft (MSFT) FTC case.
Cheniere (LNG) avoiding Panama Canal for longer LNG routes to Asia.
NY Times (NYT) closing sports desk to focus on integrating The Athletic.
Novavax (NVAX) jumps after revising COVID vaccine deal with Canada.