The Overnight Report: FOMO Is Back (Nvidia Too)

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US markets continue to move higher as buying in technology stocks pushed the Nasdaq100 to another all time high, with the Nasdaq Composite and S&P500 within a whisker of new record highs.

The ASX200’s performance was more muted yesterday, but futures are pointing to a robust start to the second last trading day of the fiscal year and quarter end.

Today is ex-dividend day for most A-REITs, see also the calendar further below.

Good Morning,

JPMorgan reported retail investors piled net $US3.2bn into stocks for the five day period through to Wednesday’s close.

“This is the very beginning of a period of FOMO that happens in the late stages of every structural bull market, every single one,” said Julian Emanuel at Evercore ISI. “What we are surprised by is the speed at which speculation has been embraced given the record bearishness just a little over two months ago and also in light of what continues to be significant economic and policy uncertainty.”

What happened overnight: NAB Markets Research

US equity markets extended their rally overnight, with the S&P500 briefly surpassing its February closing high, buoyed by growing expectations of Fed rate cuts and a potential early nomination of a dovish Fed Chair.

US data was mixed, but weakness in Consumer spending in the Q1 GDP update is a theme to watch. The front end led a decline in US Treasury yields while the USD was broadly weaker with the EUR and GBP at the top of the leader board. AUD starts the new day at 0.6547.

Overnight US economic data releases painted a mixed picture. Q1 GDP was revised down to -0.5% annualised, with consumer spending growing at just 0.5% — the weakest since the pandemic began. However, durable goods orders surprised to the upside, jumping 16.4% m/m in May, driven by aircraft orders. Ex-transport, orders still rose a solid 0.5%.

Initial jobless claims fell -10k to 236k, but continuing claims rose to 1.974m; the highest since November 2021 suggesting some softening in the labour market. Regional Fed surveys were mixed, though the Kansas City Fed’s composite index improved slightly, although price pressures became more widespread.

Although the US data had important themes to watch for the future (consumer weakness, emerging price pressures, early signs of labour market weakness), they didn’t really elicit much of a reaction by markets.

Instead, market attention was centred on a WSJ published early during our morning yesterday titled “Trump considers naming next Fed Chair early in bid to undermine Powell”. While Powell’s term as Chair still runs for another 11 months, the article said the President’s ire towards him could prompt an announcement to replace him as early as this summer.

The big picture is that Trump is not happy with Powell as he feels the Fed Chair has not delivered a lower funds rate. Thus given he has the right to nominate someone, then you have to assume he would aim for someone that can be as dovish as possible.

A White House spokesman said Trump was looking for monetary policy to complement the Administration’s growth agenda, code for someone compliant with lower interest rates. Former Fed Governor Kevin Warsh and current Governor Christopher Waller are among the names floated, with Waller gaining favour on betting markets after advocating for a July rate cut.

Treasuries rallied, particularly at the front end, with the 2-year yield falling -6bps to 3.72% and the 10-year yield down -5bps to 4.24%. A strong 7-year note auction added to the bullish tone, steepening the curve with the 5s-30s spread nearing 103bps; the widest since 2021. 

The rally in the front end of the curve was supported by an increase in Fed easing expectations, with -66bps of rate cuts now seen for the rest of 2025, so more chance of three than two -25bps cuts, and the market assuming having a dovish Chair-in-waiting would influence policy decisions this year.

The move lower in yields alongside expectations of more Fed easing this year supported US equity markets, The S&P500 closed 0.8% higher, led by tech megacaps and banks, while the Nasdaq gained 1% and the Dow rose 0.9%. The VIX collapsed to 16, reflecting the market’s growing confidence in a soft landing scenario. Earlier in the session the Eurostoxx600 closed almost unchanged at 0.09%.

The USD came under broad pressure, with the DXY index falling -0.6% to its lowest level since February 2022. The move lower in UST yields and expectations of more Fed easing weighed on the greenback, but if this is because of the view an early Fed Chair nomination by President Trump will amp the pressure, to the point where we could have a shadow Fed Chair before Powell steps down in May next year. Arguably some of the USD weakness is also a reflection of concern over Fed independence, time will tell.

Although markets have been primarily focused on Fed policy expectations, trade developments continue to simmer in the background. White House Press Secretary Leavitt downplayed the significance of the upcoming 9 July deadline for reciprocal tariff negotiations, noting that “the deadline is not critical”.

She added the President retains the option to unilaterally impose tariffs deemed “advantageous for the United States” should trading partners fail to present acceptable terms. Bloomberg reports negotiations with key partners, including Japan, India, and the EU have stalled, with uncertainty around sector-specific levies (notably on semiconductors, pharmaceuticals, and steel) complicating progress.

Meanwhile, geopolitical tensions in the Middle East remain elevated. Following the recent 12-day conflict between Iran and Israel, Iran’s Supreme Leader Ayatollah Ali Khamenei declared victory, asserting the US achieved “no gains” from the confrontation. This contrasts with President Trump’s claim that uranium stockpiles were neutralised.

However, according to the Financial Times, preliminary intelligence shared with European governments suggests Iran’s highly enriched uranium, estimated at 408kg and nearing weapons-grade levels, remains largely intact and was not concentrated at the Fordow facility.

Semiconductors leading the stock market higher: Ed Yardeni Quicktakes extract

Since the start of the current bull market during October 2022, we recommended overweighting the S&P500 Information Technology sector and have been especially positive on the S&P500 Semiconductor industry. We stuck with that recommendation during the correction in the S&P500 from February 19 through April 8. In recent days, the industry’s stock price index rose to new record highs.

Nvidia’s stock price closed at a record high for the first time since January. Nvidia’s current market capitalization is US$3.778 trillion. This valuation has made Nvidia the world’s most valuable company, surpassing Microsoft and Apple. That’s an impressive achievement considering Nvidia CEO Jensen Huang last month said, “The $50 billion China market is effectively closed to US industry.” At the company’s annual shareholder meeting today, Huang said AI and robotics are the firm’s biggest growth opportunities.

When DeepSeek was released on January 24, investors panicked and sold Nvidia and other chip stocks because they feared capital spending on AI infrastructure might be cut back. Q1 earnings reports showed cloud providers like Google, Microsoft, and Amazon remained committed to building more datacenters packed with semiconductors. Indeed, US industrial production of semiconductors continues to soar to record highs.

The same can be said for S&P500 Semiconductors forward earnings per share, which continued to rise to record highs even during the correction earlier this year.

The industry has an unusually high forward profit margin currently at 39.4%. That’s because it is constantly innovating.

By the way, the Nasdaq100 is also at a record high. We expect the S&P500 will be there too before the end of this week. Despite the fireworks in the stock market, the major bull-bear sentiment ratios remain below their averages over time. That suggests more upside for the stock market since many investors remain wary and are not overly bullish.

Corporate news in Australia

-Unibail-Rodamco ((URW)) will voluntarily delist from the ASX on August 27 with the stapled shares continuing to be traded in France on the Euronext Paris stock exchange under the code “URW”

-Betr Entertainment ((BTR)) is planning a takeover of PointsBet ((PBH)) after post error as admitted by Computershare ((CPU)) stymied the MIXI bid.

-Indonesia miner Buma is in talks with Coronado Global Resources ((CRN)) over a possible takeover or asset sales.

-Regal Partners ((RPL)) has partnered with Ark Capital Partners to acquire Mayfair Hotel for -$75m to seed a new hotel strategy.

On the calendar today:

-NZ ANZ June cons conf

-JP May retail sales

-JP May unemployment

-CH 1Q BoP

-CH May Industrial profit

-UK 1Q CA Bal

-UK 1Q GDP

-US June U of Mich sent

-US May Pers Income/Spending

-ASPEN GROUP LIMITED ((APZ)) ex-div 5c

-ARENA REIT ((ARF)) ex-div 4.5625c

-BWP TRUST ((BWP)) ex-div 9.45c

-CARINDALE PROPERTY TRUST ((CDP)) ex-div 14.23c

-CHARTER HALL GROUP ((CHC)) ex-div 24.38c (90%)

-CENTURIA INDUSTRIAL REIT ((CIP)) ex-div 4.08c

-CHARTER HALL LONG WALE REIT ((CLW)) ex-div 6.25c

-CROMWELL PROPERTY GROUP ((CMW)) ex-div 0.75c

-CENTURIA CAPITAL GROUP ((CNI)) ex-div 5.2c (15%)

-CENTURIA OFFICE REIT ((COF)) ex-div 2.53c

-CHARTER HALL SOCIAL INFRASTRUCTURE REIT ((CQE)) ex-div 3.85c

-CHARTER HALL RETAIL REIT ((CQR)) ex-div 12.4c

-DIGICO INFRASTRUCTURE REIT ((DGT)) ex-div 10.90c

-DEXUS CONVENIENCE RETAIL REIT ((DXC)) ex-div 5.237c

-DEXUS INDUSTRIA REIT ((DXI)) ex-div 4.10c

-ELANOR COMMERCIAL PROPERTY FUND ((ECF)) ex-div 1.875c

-EILDON CAPITAL GROUP ((EDC)) ex-div 2.4c

-GRYPHON CAPITAL INCOME TRUST ((GCI)) ex-div 1.27c

-GARDA PROPERTY GROUP ((GDF)) ex-div 1.8c (12%)

-GROWTHPOINT PROPERTIES AUSTRALIA ((GOZ)) ex-div 9.1c

-GPT GROUP ((GPT)) ex-div 12c

-HOMECO DAILY NEEDS REIT ((HDN)) ex-div 2.125c

-JAMES HARDIE INDUSTRIES PLC ((JHX)) AGM

-LIBERTY FINANCIAL GROUP LIMITED ((LFG)) ex-div 20c

-MIRVAC GROUP ((MGR)) ex-div 4.5c

-NATIONAL STORAGE REIT ((NSR)) ex-div 5.6c

-REEF CASINO TRUST ((RCT)) ex-div 6.6c

-RAM ESSENTIAL SERVICES PROPERTY FUND ((REP)) ex-div 1.25c

-RURAL FUNDS GROUP ((RFF)) ex-div 2.93c

-REGION GROUP ((RGN)) ex-div 7.00c

-STOCKLAND ((SGP)) ex-div 17.20c

-TRANSURBAN GROUP LIMITED ((TCL)) ex-div 33.00c

-WAYPOINT REIT LIMITED ((WPR)) ex-div 4.12c

FNArena’s four-weekly calendar: https://fnarena.com/index.php/financial-news/calendar/

The Australian share market over the past thirty days

For more detail go to FNArena’s Australian Broker Call Report, which is updated each morning, Mon-Fri.

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