The German DAX 40 index experienced a notable unwinding of long positions, signaling a shift in market sentiment and investor positioning. This development occurred against a backdrop of broader market fluctuations, including mixed performance in U.S. equity indices, volatile commodity prices, and evolving geopolitical tensions. The tech sector, in particular, faced pressure, impacting major players and influencing the overall market direction.
U.S. equity index futures indicated a slight retreat following a session characterized by mixed results. The S&P 500 and Nasdaq 100 both posted losses for the second consecutive day, with the technology sector bearing the brunt of the downturn. Semiconductor and storage companies were under particular scrutiny, exacerbated by comments from Seagate's CEO regarding the lengthy process of building new factories, which raised concerns about the memory-chip industry's ability to meet surging artificial intelligence (AI) demand. Conversely, the Dow 30 managed to outperform, closing higher as most stock sectors finished in positive territory. Treasury yields remained elevated, with bond investors closely monitoring developments in the Middle East and the fluctuating oil prices. Market pricing, as indicated by CME's FedWatch tool, suggested a continued hold on interest rates by the Federal Reserve until January.
In the stock market, Nvidia (NASDAQ: NVDA) shares saw a decline ahead of its earnings release. The session was challenging for AI and semiconductor-related stocks, with Seagate's CEO's remarks contributing to the negative sentiment. Micron (NASDAQ: MU), Western Digital (NASDAQ: WDC), and SanDisk (NASDAQ: SNDK) all experienced significant losses. Tesla (NASDAQ: TSLA) also closed lower, with its CEO, Elon Musk, reportedly losing a court battle against OpenAI CEO Sam Altman. The planned SpaceX IPO also raised concerns about potential management distractions.
On a brighter note, ServiceNow (NYSE: NOW) shares surged following Bank of America's reinstatement of coverage with a buy rating. The firm highlighted ServiceNow's potential to benefit from AI adoption. Zscaler (NASDAQ: ZS) also enjoyed a strong session, with an upgrade to a buy rating from neutral by B. Riley. In the energy sector, Nextera Energy (NYSE: NEE) announced an all-stock acquisition of Dominion Energy (NYSE: D), which sent Dominion Energy's shares sharply higher while Nextera Energy's declined. Regeneron Pharmaceuticals (NASDAQ: REGN) tumbled after its skin cancer treatment failed to meet its goals in a late-stage trial, leading to downgrades from Leerink and Citi.
Meme stocks showed varied performance, with Beyond Meat, GoPro, Krispy Kreme, and Opendoor experiencing declines, while AMC and BlackBerry saw gains. Crypto-related stocks mirrored the downward trend in cryptocurrencies, with Coinbase, MicroStrategy, Mara Holdings, Gemini Space Station, Bullish, and Circle Internet Group all trading lower. MicroStrategy's notable purchase of an additional 24,869 Bitcoin last week, increasing its total holdings to 843,738, was a significant event in the crypto space.
Commodities presented a mixed picture. Gold hovered around $4,540, but its recent gains were insufficient to offset last week's notable losses. Renewed hopes for a U.S.-Iran deal, following President Donald Trump's announcement of a suspended strike and ongoing negotiations, helped ease some inflation fears and provided support for precious metals. However, bond yields remained at concerning levels. Silver fell back into the $76 range, undoing some of the previous day's recovery, and the gold/silver ratio neared 60. Oil prices, specifically WTI crude, fell below $103 after briefly exceeding $105 in a volatile session. President Trump's statement regarding the suspension of a military strike on Iran and the initiation of "serious negotiations" suggested a potential for a "very acceptable" deal. Despite this, the International Energy Agency (IEA) warned of a record pace of global oil inventory depletion, with Strategic Petroleum Reserve (SPR) volumes at a two-year low. The U.S. also issued a new waiver allowing the sale of Russian crude already loaded onto tankers.
In foreign exchange and central bank news, Bitcoin dipped below $77,000 after another down session for tech stocks, though it remained above its mid-term support level of approximately $74.9K. Ether managed to hold above $2.3K, showing slight outperformance. The U.S. Dollar Index moved out of the 99s as oil prices retreated and yield increases paused. USD/JPY touched 159 again, while GBP/USD saw a notable recovery to the 1.34s, influenced by UK politics and energy market movements, leading to increased intraday volatility. AUD/USD retreated following minutes from the latest Reserve Bank of Australia (RBA) meeting, which signaled a potential pause in rate hikes. Kevin Warsh was slated to be sworn in as Fed Chair on Friday.
European Central Bank (ECB) President Christine Lagarde expressed concern about global bond market stress, noting that the EU was set to downgrade its growth forecast due to a "stagflationary shock." The Bank of England's officials indicated caution regarding interest rate decisions, with one stating they shouldn't be "trigger-happy" and another suggesting that the conflict's impact might not be temporary. The International Monetary Fund (IMF) raised its growth forecast for the UK economy but advised the Bank of England to maintain flexibility in its monetary policy and be prepared to respond forcefully if second-round inflation effects prove stronger than anticipated. Japanese Finance Minister Katayama highlighted that oil price volatility was directly impacting FX and broader financial market instability, with authorities closely monitoring speculative flows and ready to intervene against excessive currency movements.
Client sentiment data from Capital.com revealed shifts in market positioning. For indices, a pullback in tech-heavy indices led to a rise in long bias for the S&P 500 (to 67% from 65%) and the Nasdaq 100 (to 60% from 57%). The Dow 30's outperformance reduced long sentiment there (to 65% from 68%). A significant unwind in buy sentiment was observed in the DAX 40, which dropped to 63% from 74% the previous day. Smaller reductions in long bias were seen in the FTSE 100 (79% from 82%) and the ASX 200 (89% from 91%), though traders in both remained in extreme buy territory. For commodities, sentiment in gold remained in extreme buy territory (81% from 82%), with longs generally preferring to hold positions despite recent price increases. Silver saw a slight increase in buy sentiment (to 86% from 85%). The majority short bias in WTI crude oil rose slightly to 59%. In FX, GBP/USD moved out of heavy buy territory (to 65% from 61%) and GBP/JPY also shifted (from 64% to 72%) following the notable recovery in both pairs, attributed to pound strength. USD/JPY shifted from a slight buy (52%) to a slight sell (52%).
Economic data released included the U.S. NAHB's housing market index for May, which rose to 37, exceeding forecasts but remaining in negative outlook territory. Japan's preliminary Q1 GDP showed a quarterly increase of 0.5% and an annualized rate of 2.1%, both surpassing expectations. Upcoming data releases included U.S. pending home sales, API's weekly energy inventory readings, and speeches from FOMC members. Earnings from Home Depot were also anticipated, along with UK labor data.
