June 20, 2024

The staggering run for NVDA stock carried it to the market’s mountaintop Tuesday, as it became the most valuable company in the S&P. Stock indexes, meanwhile, ticked to more records following the latest signal that the U.S. economy’s growth may be slowing without cratering.

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The S&P 500 added 13 points to 5487 to set an all-time high for the 31st time this year. The Nasdaq composite edged up by 5 to 17,862 to set its own record, while the Dow Jones Industrial Average added 56 points, to 38,834 led by gains in AMGN, CAT, GS and HD.

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Underneath that calm market surface, NVDA was the star again. It rose again, this time up 3.5% and it lifted its total market value further above $3 trillion, again.

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It grabbed the top spot from MSFT, which has been trading the crown back and forth with AAPL after they wrested it from past titans like XOM and cigarette-maker PM.

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MSFT and AAPL were at the vanguard of Big Tech, which is the dominant force in the U.S. stock market after amassing strength through the digitization of the world. NVDA is riding the wave of a more specific tech surge, this time in artificial intelligence.

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NVDA’s chips are helping to develop AI, which proponents expect to change the world as much or more than the internet, and demand for its chips has proven to be shockingly voracious. Its revenue routinely triples every quarter, and its profit is rocketing at even more breathtaking rates. Its stock is up nearly 174% this year, and it alone was responsible for nearly a third of the S&P’s entire gain for the year through May.

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Of course, a potential danger of having a handful of superstars responsible for most of the stock market’s run to records is a more fragile market. If more stocks were participating, it could be a signal of a healthier market.

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Stocks broadly got some lift Tuesday from easing yields in the bond market. Treasury yields fell after a report showed sales at U.S. retailers returned to growth last month but remained below economists’ expectations at 0.1% overall gain and a 0.1% decline in the core rate excluding food and energy.

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That could be an encouraging signal for the Federal Reserve, which is trying to pull off a tough balancing act for the economy. The Fed wants to slow the economy by just enough through high interest rates to get inflation under control. The hope is that it will cut its main rate, which is at its highest level in two decades, in time so that the slowdown stops short of a recession.

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Following the retail sales data’s release, bets built among traders that the Federal Reserve will cut rates at least twice this year, according to data from CME Group. Fed officials themselves are largely penciling in one or two cuts in 2024.

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The yield on the 10-year Treasury fell to 4.21% from 4.29% late Monday. The two-year yield, which more closely tracks expectations for the Fed, fell to 4.70% from 4.77%.

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A survey of global fund managers by one of the largest banks showed that they are the most optimistic about stocks since the autumn of 2021, with relatively little hiding out in cash and allocations heavy to stocks. Fewer managers are also calling for a “hard landing” where the economy tumbles into a recession.

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The downside of Tuesday’s weaker-than-expected data is that it could be a warning signal that the main engine of the U.S. economy, spending by households, is cracking. Alongside May’s numbers, the U.S. government also revised down figures for retail sales in prior months.

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Inflation is still high, even if it has slowed since its peak, and lower-income households in particular are struggling to keep up with the more expensive prices.

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LEN fell 5% after its CEO said “challenged consumer sentiment” and swings in interest rates are testing the company. Its stock fell even though it reported better profit for the latest quarter than analysts expected.

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Shares of FISK more than halved to 2 cents after the electric-vehicle maker filed for Chapter 11 bankruptcy protection. The company cited “various market and macroeconomic headwinds.”

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On the winning side was LAZB, which jumped 19% after reporting stronger profit and revenue for the latest quarter than expected. The furniture maker said the current quarter is also off to a good start, with a solid Memorial Day, even as high interest rates keep a lid on housing activity.

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SILK jumped by 24% after BSX agreed to buy the medical device company in a cash deal valuing it at roughly $1.26 billion, including its cash.

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In stock markets abroad, indexes continued to recover in Europe following last week’s rout. Surprise victories by far-right parties in elections had raised worries about the potential for mounting debt loads at the Frenchgovernment in particular as France’s CAC 40 rose 0.8% for a second straight gain.

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In Asia, Japan’s Nikkei 225 rose 1%. Heavyweight TM climbed after its shareholders rejected a proposal to force Akio Toyoda, grandson of the automaker’s founder, to leave his post as chairman of the board.

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Earnings this week will see: yesterday - LEN lower and LAZB higher; today – DRI higher and JBL, KR, WGO lower; Friday – KMX, FDS.

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Economic reports are: yesterday – May retail sales rose by 0.1% but ex-autos were lower by 0.1%, May industrial production rose by 0.9% which was the largest increase since last July and capacity utilization increased to 78.7; today – May housing starts down by 5.5% while building permits, an indicator of future activity, was off by 3.8%, weekly jobless claims edged up to 238,000, June Philadelphia Fed Activity Index rose by a scant 1.3; Friday – May existing home sales, May L.E.I.