Mag 7 Down $2.3T!; The SpaceX IPO Order Mystery; Semis Spring Back
Let’s check how far the Magnificent 7 market cap fell in June, a strange Korean broker drama, and Warren Buffett’s caution on Gates Foundation.
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Evening Song
Full moon rising on the waters of my heart,
Lakes and moon and fires,
Cloine tires,
Holding her lips apart.
Promises of slumber leaving shore to charm the moon,
Miracle made vesper-keeps,
Cloine sleeps,
And I’ll be sleeping soon.
Cloine, curled like the sleepy waters where the
moon-waves start,
Radiant, resplendently she gleams,
Cloine dreams,
Lips pressed against my heart.
– Jean Toomer (1923)
Note 1: I was awakened at zero dark-thirty this morning by the light of the full moon.
Note 2: The light reminded me of this poem.
Note 3: Cloine, in this poem, is a woman, not the town in County Cork, Ireland.
Did You Know?
Today is the final day (and business day) of June. Month to date, according to the Financial Times, the “Magnificent Seven” group of mega-cap stocks has lost more than $2.3 trillion in market cap. The rotation of capital away from these companies, who in some cases are spending more on AI infrastructure than they generate in free cash flow, has been quite violent. In fact, the group is not just down a rough 10% in June, but stands down about 3% year to date. This group includes Nvidia (NVDA), Meta Platforms (META), Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL), Amazon (AMZN), and Tesla (TSLA).
Front-Page News: Buffett Cautious on Gates
This is very interesting. The story hit late on Monday evening and is running through the wee-hours of Tuesday morning on the front page of the Wall Street Journal‘s website. Apparently, for the first time in more than 20 years, Berkshire Hathaway’s (BRK.A) (BRK.B) Warren Buffett is not readily making his annual donation to the Gates Foundation.
According to the Journal, Buffett is delaying his decision on making a donation to that charity until later this year, potentially out into the holidays. The billionaire philanthropist is said to be waiting to see the findings of a review into the ties between the Gates Foundation and the late Jeffrey Epstein.
The results of that review are due some time this summer. From 2006 through 2025, Buffett has donated a rough $48 billion to the charity. Buffett stepped down as a foundation trustee in 2021, after the divorce of Bill and Melinda Gates was announced. He has continued, until now, to make his annual donation, typically in June or July.
Alleged Order Mishap on SpaceX IPO
Bloomberg News is reporting that the SpaceX (SPCX) deal left Mirae Asset Securities, South Korea’s largest broker, apologizing to its customer base and has Korean regulators looking into the company’s practices. Mirae was apparently the only one of 23 SpaceX underwriters to receive no equity allocation whatsoever from that deal. Bloomberg reported that there was a misunderstanding over how orders were expected to be submitted.
The company inadvertently treated an early request to indicate investor interest as the point at which it had submitted binding orders. As a result, more than $1.1 billion worth of Korean demand was never entered into the IPO order book. Simply incredible. Weeks before book-building even began, the bookrunners circulated an email asking underwriters to indicate investor demand. This was aggregated in a virtual data room, which is in line with modern procedures for large deals of this kind.
Mirae responded to that email, and believed that it had placed firm orders for its customers. From the perspective of those running the deal, these responses were indications of interest, not firm bids. Actual orders were entered later. Twenty-two of 23 underwriters understood the instructions. In all my years working as a fly on the wall at First Boston during the glory years of the “Dot-Com” bubble, I don’t think I have ever heard of an underwriter entering zero orders for its clients for a deal that they were involved in. This story is beyond amazing.
Monday Fun-Day!
Equities came roaring back on Monday after what had been a tough five-day period last week. Well, sort of. Participation was definitely muted as the holiday week kicked off on little macroeconomic news and almost no earnings releases. On that note, “Jobs Day” should be a blast this Thursday as traders and investors head for the beach and put their algorithms on “autopilot.”
Long story, short… parts of the market that were hurt last week found a bid on Monday. The upside catalyst was a renewed peace effort between the U.S. and Iran after that war had “flared” up over the weekend. In a continuation of the theater of the absurd, the Strait of Hormuz is apparently open again and nobody, for the moment, is trying to kill anyone else in that region. Crude prices were up small, while Treasury yields literally went nowhere.
The Nasdaq 100 rebounded sharply off of its 50-day simple moving average, gaining 2.25% for the day as “$10K Portfolio” holding Rocket Lab (RKLB) stole the show, gaining 15.9% on the session.
This action may have defied a “double top” pattern of bearish reversal from reaching pivot and fully developing. The action was supported by a 3.83% run made by the Philadelphia Semiconductor Index. The semis were led by KLA Corp (KLAC) and Applied Materials (AMAT) as the equipment providers emerged from the pack. This action allowed the Nasdaq Composite (+2.07%) to regain its 50-day simple moving average without ever having lost contact:
Readers will see that the Nasdaq Composite did not put up a “double top” as did its cousin index. Instead, this index may still be working on a closing pennant pattern that could foretell increased volatility.
That leaves us with the S&P 500. This index tacked on 1.18% on Monday:
Readers will see that the S&P 500 not only regained its 50-day SMA and found support there but also recaptured its 21-day exponential moving average. This could re-energize the swing-trader base this week if they are at their desks.
Breadth
Not as minty-fresh as you might have thought. Six of the 11 S&P sector SPDR ETFs closed out the regular session on Monday in the green. The Discretionaries (XLY) and Tech (XLK) led the charge, while the Materials (XLB) lagged badly. Growth outperformed, while cyclicals and defensives battled it out with no clear winner between the two. Speaking of winners…
Winners beat losers by a five-to-four margin at the NYSE and by a rough three-to-two at the Nasdaq. Now, it gets tricky. Advancing volume took a commanding 72.3% share of Nasdaq-listed trade, but just a 48.5% share of composite NYSE-listed activity. No, Monday did not serve as a “Day One” bullish reversal. Why?
It was more than the split between advancing and declining volume at the NYSE. It was also trading volume in the aggregate. Of course, trading volume was down sharply from Friday’s rebalancing. That makes sense. Trading volume was also lower across the listings of the NYSE, Nasdaq listings and the membership of the S&P 500 versus the Monday prior.
Economics (All Times Eastern)
08:55 – Redbook (Weekly): Last 10.0% y/y.
09:00 – Case-Shiller HPI (Apr): Expecting 0.8% y/y, Last 0.8% y/y.
09:00 – FHFA HPI (Apr): Expecting 0.2% m/m, Last 0.1% m/m.
09:45 – Chicago PMI (June): Expecting 60.5, Last 62.7.
10:00 – CB Consumer Confidence (June): Expecting 94.2, Last 93.1.
10:00 – JOLTs Job Openings (May): Last 7.618M.
10:00 – JOLTs Job Quits (May): Last 2.977M.
4:30 p.m. – API Oil Inventories (Weekly): Last -765K.
The Fed (All Times Eastern)
No public appearances scheduled.
Today’s Earnings Highlights (Consensus EPS Expectations)
After the Close: STZ (3.21), NKE (.13)
At the time of publication, Guilfoyle was long NVDA, MSFT, RKLB equity.
