Last week, the three major stock indexes in the United States continued their previous upward trend, with the S&P 500 index breaking the integer barrier of 5000 points and reaching a historic high. The NASDAQ index also broke through 16000 points during trading, one step away from the historic high of 16212 points set in November 2021. Although the trend of the US stock market is good, it still faces negative factors such as performance differentiation of listed companies, and there are still many controversies about the trend of the US stock market.
US stocks continue to maintain strong performance. Chinese assets perform well
Last week, the Dow Jones index rose slightly, the S&P 500 index rose 1.37%, and the Nasdaq index rose 2.31%. The performance of Chinese asset targets is eye-catching, with the Nasdaq China Golden Dragon Index rising by over 5%, far outperforming the three major US stock indexes. The FTSE China A50 Futures Index's weekly increase set a new record since the end of July 2023.
Large technology stocks still lead the market in gains.
The six major technology stocks of FAAANM (Facebook, Amazon, Apple, Alphabet, NVIDIA, Microsoft) performed outstandingly. NVIDIA rose 9.03% last week, with a market value increase of $147.5 billion, approaching Amazon's total market value. Google's parent company Alphabet rose 4.65% last week, with a market value increase of approximately $82.6 billion.
The trend of large technology stocks is due to the company's recent unexpected quarterly report.
Among them, Meta delivered its strongest financial report in the company's history, with performance in the fourth quarter of last year and guidance for the first quarter of this year exceeding Wall Street's expectations. It also announced an increase of $50 billion in stock repurchases and its first-ever dividend payout. After the financial report was released and the company's stock price surged by 20%, it remained at a high consolidation level last week.
Google's parent company Alphabet's revenue and profit exceeded expectations in the fourth quarter of last year, and cloud computing achieved full year profitability for the first time. Amazon's cost reduction efforts have been effective, with net sales in the fourth quarter of last year better than expected and performance guidance for the first quarter roughly better than expected. Apple also gave a fourth quarter report that exceeded expectations, with earnings per share reaching a new high.
Artificial intelligence leader Microsoft achieved its best quarterly revenue growth in nearly two years in the fourth quarter of last year, and set a new high in revenue for five consecutive quarters. Multiple indicators such as EPS earnings per share and cloud business revenue growth exceeded market expectations. The company's stock price rose 2.27% in a week.
As of now, Microsoft's total market value has reached $3.12 trillion, once again surpassing Apple to become the world's largest enterprise by market value.
Nvidia's Q4 financial report was scheduled to be released after the Chinese New Year on February 21st. Analysts are optimistic that Nvidia's profits will once again exceed expectations in this quarter, thanks to the surge in chip demand. Nvidia's adjusted profit growth will reach 400%.
Performance differentiation of listed companies
But not all listed companies have the same performance as large technology companies, which has also led to the divergence of the US stock market trend.
According to Bloomberg, as of last Friday afternoon local time, about 80% of companies in the S&P 500 index outperformed expectations in the fourth quarter of last year, easily exceeding the 10-year average of 74%. Among them, the energy, information technology, and consumer goods industries performed the best.
In addition, the proportion of small cap stocks in the benchmark Russell 2000 index that experienced losses in the fourth quarter of last year is close to 38%, the highest level since 2019. Currently, approximately 30% of the constituent companies in the index have already released financial reports.
It is worth noting that the Russell 2000 index underperformed the S&P 500 index in January, setting a new record since March 2020. This indicates that while large US companies are making a lot of money, small and medium-sized enterprises are facing greater difficulties.
Jason Hunter, head of strategy at JPMorgan Chase, said, "The excellent performance of small cap stocks in the fourth quarter of last year may have come to an end. In our view, this is a trend that seems to have been ongoing for a long time, at least in the short term, with a pullback. Currently, the market lacks breadth, but it can be said with certainty that the S&P index will not have a broad and expanding rebound."
The regional banking crisis has not eased, and Yellen is making every effort to calm the market
Investors' concerns about the US stock market also include a resurgence of regional banking crises.
The bank's performance in the fourth quarter of last year was significantly lower than market expectations and reduced dividends, leading to market concerns about its credit assets. After a week of decline of 42%, New York Community Bank continued to decline by 18.87% last week. After experiencing consecutive stock declines, the New York Community Bank guarantees that there is enough deposit to sustain operations. In addition, the bank has also taken measures such as replacing executives to stabilize market sentiment. But panic continues to spread. Rating agency Moody's has downgraded the credit rating of New York Community Bank to junk.
In fact, this crisis is not limited to the United States alone, and banks in other regions may also be deeply involved.
Last Wednesday, Deutsche Pfandbriefbank (PBB), which focuses on real estate investment in Germany, stated in a statement that the bank had increased loan loss provisions in the fourth quarter of 2023, with a total provision for the year reaching 215 million euros (231.7 million US dollars) to cope with the sluggish US real estate market. The bank pointed out that although the provision has increased, its financial strength remains strong and the bank remains profitable. However, PBB describes this commercial real estate risk as the most severe real estate crisis since the financial crisis. The bank's stock fell 18% last week.
This is the second German bank to issue a warning within two weeks. Previously, Germany's largest bank, Deutsche Bank, announced that it had increased provisions by 123 million euros in the fourth quarter of last year to absorb potential losses caused by US commercial real estate. This is equivalent to four times the reserved amount for the same quarter of the previous year. Deutsche Bank's stocks listed on the Frankfurt Stock Exchange have fallen by 10% in the past week and have accumulated a 25% decline so far this year.
In addition, Japan's Qingkong Bank stated that non-performing loans related to its US office resulted in its quarterly shift from profit to loss. Swiss private bank Baosheng also reported a loss of approximately $680 million due to the inability to recover a loan from a European conglomerate, resulting in a 55% decrease in its annual profit. The company is analyzed to be an Austrian enterprise engaged in real estate development.
Some institutions are starting to sell commercial real estate. The Canadian Public Pension Investment Board recently sold a 29% stake in an office building in Manhattan for $1, and it is reported that the fund had invested as much as $71 million in the property.
But senior US financial officials have also issued warnings to the market.
Last week, US Treasury Secretary Yellen stated that US regulators are paying attention to the risks of non bank mortgage lending institutions, and if the market experiences high pressure, one of them may go bankrupt. Yellen said in the Senate Banking Committee last Thursday that the Financial Stability Oversight Committee is very concerned about this because non bank mortgage companies cannot take deposits, while banks can. Non bank institutions have become the main participants in the mortgage market, but their operating funds mainly rely on short-term loan financing tools and do not have the authority to use the Federal Reserve's emergency lending tools, namely discount windows.
But at the same time, Yellen is also trying his best to appease the market. At last Thursday's hearing, Yellen emphasized that the risk exposure of large banks is "quite low", but smaller banks may be facing pressure related to high office vacancy rates, rising interest rates, and declining valuations.
"For some banks, this will be a major concern, but overall, the capital situation of the entire financial system is good. Overall, the US financial system is healthy," Yellen said.