US Stocks Struggle, Big Tech Sinks, VIX Spikes And Analysts Raise Bearish Calls: What's Driving Markets Monday

Stocks appear to be off to a shy start to the week, failing for the time being to recover after snapping multiweek winning streaks on Friday as the overall risk sentiment remains subdued. Tesla Inc. TSLA is in the spotlight, losing over 2.5%, after Goldman Sachs downgraded the stock from Buy to Neutral.

The VIX fear index rose 5%, reaching two-week highs, as investors remain concerned about the potential impact of further monetary tightening at the Fed’s monetary policy meeting one month from now. Investors now assign a 77% probability for the Fed to raise rates by 25 basis points in July, up from 72% on Friday.

Cues From Monday's Trading:

Both the S&P 500 and the Dow Jones 30 were basically unchanged for the day.

The tech-heavy Nasdaq 100 underperformed, easing 0.4%, while small caps in the Russell 2000 index rebounded by 0.6%.

U.S. Indices’ Performance on Monday

Analyst Color:

Morgan Stanley’s chief U.S. equity strategist and chief investment officer, Michael Wilson, issued a bearish note forecasting a 10% drop for the S&P 500 Index heading to the end of the year.

The expert warned that equity risk premium is at very unattractive levels and highlighted that stocks are trading in a "high risk zone," susceptible to sharp reversals.

Monday’s Trading In Major US Equity ETFs: In midday trading on Monday, the SPDR S&P 500 ETF Trust SPY was 0.1% lower to $432.6, the SPDR Dow Jones Industrial Average ETF DIA ticked 0.1% higher to $337.61 and the Invesco QQQ Trust QQQ was 0.8% lower to $359.50, according to Benzinga Pro data.

The Energy Select Sector SPDR Fund XLE and the Real Estate Select Sector SPDR Fund XLRE were the leaders, up 1.8% and 1.9%, respectively. The Consumer Discretionary Select Sector SPDR Fund XLY and the Communication Services Select Sector SPDR Fund XLC were the laggards, both down 0.9%

Latest Economic Data:

The general business activity index for manufacturing in Texas rose to -23.2 in June 2023, the highest level in three months and better than forecasts of -26.5. However, the reading indicated that business conditions were worsening, with contractions in production (-4.2 vs -1.3), new orders (-16.6 vs -16.1), shipments (-17 vs -3), and capacity utilization (-6 vs -4.9).

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Stocks In Focus:

• Tesla, Inc. fell 5% after Goldman Sachs downgraded the stock from Buy to Neutral.
• Nvidia Corp. NVDA and Meta Platforms META lost 4.6% and 3.4% respectively as an AI-driven rally fades.
• Carnival Corp. CCL fell 11% despite reporting better-than-expected financial results. Rising costs and disappointing Q3 EPS guidance disappointed investors.
• Lucid Group, Inc. LCID jumped 6.4% after the company said it would assist U.K. automaker Aston Martin Lagonda Global Holdings ARGGY in making luxury electric vehicles.
• Real estate stocks all jumped as SL Green Realty Corp. SLG rose 18% after the company sold a 49.9% interest in 245 Park Avenue to a U.S. affiliate of Mori Trust at a gross asset valuation of $2 billion. Boston Properties Inc. BXP, Vornado Realty Trust VNO and Alexandria Real Estate Equities, Inc. ARE rose 8.2%, 13.2% and 4%, respectively.

Commodities, Bonds, Other Global Equity Markets:

Crude oil ticked 0.8% higher, with a barrel of WTI-grade crude trading at $69.70. The United States Oil Fund ETF USO was 0.7% higher to $62.83 per share.  

Treasury yields barely moved, with the 10-year yield down by 2 basis points to 3.72% and the two-year yield flat at 4.74%. The iShares 20+ Year Treasury Bond ETF TLT was flat for the day. 

The dollar marginally eased, with the U.S. dollar index, which is tracked by the Invesco DB USD Index Bullish Fund ETF UUP, down 0.1%. The EUR/USD pair, which is tracked by the Invesco CurrecyShares Euro Currency Trust FXE, was 0.1% higher to 1.0905.

European equity indices closed in the green, snapping five straight sessions of losses. The SPDR DJ Euro STOXX 50 Etf  FEZ rose 0.4%. 

Gold surged 0.2% to $1,924/oz. The SPDR Gold Trust GLD was 0.4% higher to $178. Silver rose 1.8% to $22.8, with the iShares Silver Trust SLV up 1.8% to $21. Bitcoin BTC/USD fell 1.3% to $30,068.

Staff writer Piero Cingari updated this report midday Monday. 

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