LD Capital Weekly Report: Big Technology’s performance explodes, US stocks and yields soar

Source: LD Capital

Market Summary

U.S. employment data beat expectations, adding 353,000 people, almost double the forecast. Coupled with the average hourly earnings growth of 0.6%, which is twice as expected (but some analysts believe that the decrease in working hours caused by the extreme cold weather has brought about passive growth in hourly wages), the data for November and December have also been significantly upwardly revised. Coupled with Powell's personal suppression of expectations for a March interest rate cut and strong ISM manufacturing data, the market had to reprice the path for interest rate hikes. The probability of raising interest rates in March has dropped to 21.5%, and the market will need to digest the differences in views after the U.S. employment report in the coming week. However, in general, Powell is regarded as a paper tiger. The market does not really care whether the Fed cuts interest rates in March or May. Unless inflation accelerates, the stock market should continue to be optimistic.

The most obvious reaction was in the interest rate market. The 2-year U.S. bond yield surged 20bp and rebounded from 4.17 to 4.37. The 10-year U.S. bond yield rose 12bp and rebounded from 3.8 to above 4. The 30-year U.S. bond yield rose from 4.1 to 4.1. rebounded to 4.22. This week, the market has re-priced the short-term interest rate market to a greater extent. Of course, this wave of correction is also due to the exaggerated drop in U.S. secondary market interest rates after the December FMOC meeting. We also reminded many times at the weekly meeting that interest rates have bottomed out. The current interest rate The market is still in a correction phase and is unlikely to return to last year's highs without a major risk event.

Another major event in the interest rate market is that the Ministry of Finance has lowered the scale of refinancing than expected and stated that it will not further increase the scale of longer-term treasury bond auctions, which is regarded as beneficial. Help boost demand for U.S. debt. The U.S. Treasury Department expects net borrowing in the first quarter to be $760 billion, down $55 billion from its previous forecast. In the second quarter, net borrowing is expected to be $202 billion, less than half of Wall Street's expectations. Mainly because tax revenue is higher than previously expected, there are currently more than 800 billion US dollars in the Treasury account, which is the most abundant moment in the past two years. However, analysts warn that financing uncertainty in the second quarter is high, and Congress may approve US$78 billion in taxes. relief bill, causing the deficit to worsen.

The better-than-expected bond issuance by the Ministry of Finance and the economic data have offset some of the impact of each other. Currently, the derivatives market still expects a 150bp interest rate cut in the next 12 months, which is almost unchanged from last week. ：

U.S. GDP may rise again in the first quarter, with GDP Now forecasting growth of 4.3%, higher than the 3.3% growth in the fourth quarter. The current market is therefore very optimistic and believes that the rising market has been supported. Although economic data has led to a rebound in interest rates, U.S. stocks have continued to rise under the strong protection of technology giants. The S&P and the Dow both hit record highs last week, and the three major stock indexes have closed higher in 13 of the past 14 weeks.

Mag7’s financial report last week was generally good. Since the market’s expectations for these companies are already quite high, even if some indicators are lower than expected, it cannot be said to be bad. Technology stocks are still supported. Bull market sentiment, specifically:

Microsoft achieved its best quarterly revenue growth in the past two years and hit new revenue highs for five consecutive quarters. Core indicators such as EPS and intelligent cloud business also exceeded expectations. Artificial intelligence drives Azure cloud Revenue increased by 6%, and the contribution was higher than the previous quarter, but the growth may not be satisfactory;

Google’s advertising business revenue in the fourth quarter was US$65.5 billion, which was lower than analysts’ expectations of US$65.8 billion, triggering market There are also concerns that Google's financial report may reveal the risk of lagging behind Microsoft, and the stock price fell 6.7%;

It announced that its fourth-quarter revenue exceeded expectations by 25%, setting the highest growth rate in a single quarter. After planning to repurchase US$50 billion in shares and pay dividends for the first time in the company's history, Meta rose more than 20% in early trading. Its intraday market value soared by approximately US$200 billion, creating the largest increase in the value of a stock in the history of US stocks.

Due to the effectiveness of cost cutting, Amazon’s fourth-quarter results and first-quarter performance guidance were generally better than expected, causing Amazon’s stock price to rise by more than 9% after the market closed. Among them, Amazon's cloud business revenue increased by 13% year-on-year, alleviating investors' concerns about declining demand for cloud services;

Apple's quarterly revenue returned to year-on-year growth for the first time in a year, and EPS hit a new high. And iPhone sales were higher than market expectations, and service revenue hit a record high for four consecutive quarters. However, the revenue in Greater China, the third largest market, exceeded expectations by about 13% year-on-year, confirming market concerns. Apple closed down 3.4% for the week.

Although Nvidia has not yet announced its latest results, its stock price has soared 34% this year because technology giants such as Amazon, Microsoft, Google and Meta have stated that they will continue to increase spending on AI and increase spending. The promise and the beautiful financial report continue to boost the share price of "shovel seller" NV. AMD's performance this quarter has been mediocre, and its performance guidance for the first quarter has been lower. It is expected that sales of its own artificial intelligence chips will increase by 75% in 2024, reaching more than 3.5 billion US dollars, but Wall Street has been predicting that this number will reach 80 One hundred million U.S. dollars. In comparison, NV's data center sales in a quarter were US$16 billion, and the gap between the two is very large.

What’s interesting is that AMD fell 7% after the financial report, but then rose back in the next two days, falling only 0.6% for the whole week. Compared with Intel, which also had guidance that was lower than expected, the performance was stronger. After the financial report, it gapped down and opened 11% lower. The decline continued to expand in the next few days. It seems that AMD has the potential to replace Tesla and become a member of the new Mag:

Bank of America Hartnett believes that originally Stocks should rise only when yields fall, but the two stocks have risen together recently, which means that the stock market is supported by strong performance growth and is not afraid of rising bond yields. Now investors are betting that the Federal Reserve will slow down, and believe that artificial intelligence is far from effective. In this context, technology stocks that are already very expensive must be held firmly and not buck the trend. On the other hand, cheap stocks with discounted valuations must be allocated to hedge, such as Chinese stocks or small-cap stocks.

China’s major A-share stock index hit a new low last week, but the stocks we mentioned earlier with high dividends and stable performance and dividends have clearly resisted the decline, such as major banks, coal mining stocks, three barrels of oil, and telecommunications stocks. Wait for even a lot of gains. In addition, there is reason to suspect that the Chinese stock market's leakage will make officials more determined to maintain the stability of the RMB exchange rate. In fact, the RMB has been relatively strong among non-US currencies recently:

The AI ​​bubble has not yet exploded, so far valuations are still relatively rational:

This picture shows the US ISM The relationship between the Manufacturing Purchasing Managers Index and the new orders/inventory sub-data, the latter is leading, based on which Bank of America predicts that the U.S. Manufacturing PMI may further rise to between 53 and 55 in the summer:

Foreign capital has continued to hunt for dips. Last week, US$6.3 billion flowed into Chinese stock funds, while nearly US$12 billion flowed in the week before. The past four weeks have seen the largest cumulative inflows on record, at just over $21 billion

China’s retail consumption year-on-year indicator calculated by Goldman Sachs has accelerated its recovery in recent months, and Data from the National Bureau of Statistics show growth is slowing:

Despite the economic downturn, China still maintains a relatively tight monetary policy. A Goldman Sachs China client survey shows that although mainland investors believe that China 's stock market is already attractive from a valuation perspective, but they have struggled to find a catalyst for the market's rise this year. Offshore investors are paying attention to the upcoming Third Plenary Session of the Central Committee of the Communist Party of China and possible structural reforms. Mainland clients expect that policies will continue to be loose this year, but the intensity and scale will be limited. It will be more of a point-based loosening rather than a large-scale stimulus.

China’s net foreign exchange outflows for five consecutive months turned into balance in December:

Confidence in China’s real estate debt is improving:

Goldman Sachs’ hedge fund clients have been net buyers of information technology stocks for four consecutive weeks, and their current net allocation to information technology stocks accounts for 21.2% of their total net exposure. This is a significant increase from 13.9% in early 2023 and 18.7% in early 2024, and the current allocation to information technology is in the 90th percentile compared to the past five years:

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bits The currency spot ETF has reversed its decline in the past week and has had net inflows for 6 consecutive trading days:

Hedge funds began to sell short in the Bitcoin futures market:

MS: Liquidity support may weaken this year

As yields have become attractive, U.S. Treasury bonds have gained the favor of domestic investors in the residential sector, offsetting overseas selling:

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Institutional sentiment indicators have increased but remain at neutral Interval: