6/18/24

Broad-based rally powers US stocks to record highs

The S&P 500 secured another all-time high with a 0.3% advance while the Nasdaq 100 eked out a gain to close at another record and extend its winning streak to seven, its longest since November.

Gains were broad based for the second straight day, but unlike the opening session of the week, the tech sector didn’t lead the way higher. More cyclical pockets of the market like financials, industrials, and energy were the top-performing US sector ETFs. Communication services and consumer discretionary were the laggards.

That being said, Nvidia did put in a strong showing, advancing 3.5% to pass Microsoft as the biggest publicly traded company. It’s the first time a company other than Microsoft or Apple has nabbed that top spot since 2019.

GE Vernova was the atop the S&P 500’s leaderboard, up 6.4% on little news but a notable pick-up in demand for call options. Homebuilder Lennar was near the other side of the spectrum, down 5% after its guidance for orders failed to impress analysts.

Bonds were well bid after US retail sales rose by less than expected in May, with a negative revision to April’s reading. The iShares 20+ Year Treasury Bond ETF gained 0.9% on the day.

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1h

Federal Reserve cuts rates by 0.25%, signals 50 basis points of additional easing by year-end

The Federal Reserve cut interest rates for the first time this year, lowering its policy rate to a range of 4.25% to 4.5%, as anticipated.

The “dot plot” from the Summary of Economic Projections shows the median Fed official thinks it will be appropriate for the policy rate to end this year at 3.625% (expected 3.875%) and 3.375% in 2026 (expected 3.375%) if the economy evolves in line with their expectations.

Stocks slid during Fed Chair Jay Powell’s press conference, at which he described the reduction as a “risk-management cut,” didn’t rule out that the US economy might still warrant restrictive monetary policy, and signaled there was not wide support for a larger 50 basis point cut at this meeting.

The iShares Russell 2000 ETF, which was up nearly 2.5% at the highs, fell into negative territory before rebounding. The SPDR S&P 500 ETF traded down as much as 0.9%, before paring those losses to end up right around where it was when the rate cut was announced.

The US central bank raised its forecast for how high core PCE inflation will be next year to 2.6% from 2.4% in June, which heavily implies that monetary policymakers are willing to look through the near-term inflationary impulse from tariffs and softening job growth has assumed more prominence in their decision-making process.

There was only one dissent: newly-added Fed Governor Stephen Miran, who favored a 50 basis point cut at this meeting and appears to be the outlier Fed official who thinks the policy rate should end the year at 2.875%.

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LoanDepot shares soar as it gathers retail interest

Shares of the struggling mortgage originator have more than doubled in the last month.

Loan Depot Shares Soar amid Wall Street Bets optimism

markets

3h

Plug Power’s option-fueled romp higher continues to accelerate

For the second day in a row, Plug Power is surging on little to no news and a ton of seemingly bullish option flow.

Tuesday’s call volumes of 97,079 were over 5x the 20-day average, and the hydrogen fuel cell company has already nearly doubled that mark by 11:54 a.m. ET on Wednesday.

So far 181,671 call options have changed hands, with activity once again centered in contracts with a strike price of $2 that expire on October 17 and this Friday.

The put/call ratio is less than 0.03, which if sustained would be the lowest since May 27, 2020. The volumes appear to be a bit of a mirage when it comes to assessing just how bullish these flows are: some of this looks to be an unwind of the previous session’s trade, with the October call options being sold.

markets

3h

IonQ’s purchase of Vector Atomic will support efforts to grow its sales to governments, says Needham & Company

IonQ’s announced plans to acquire quantum sensor company Vector Atomic in an all-stock deal worth approximately $400 million. The purchase is expected to close in Q4.

“This acquisition marks a significant acceleration and expansion opportunity for IonQ as we continue to lead the commercialization of quantum technologies,” Niccolo de Masi, chairman and CEO of IonQ, said in a press release. “Integrating Vector Atomic’s sensing capabilities across our compute, networking, and space portfolios will advance our mission to provide scalable, commercial-grade quantum solutions for our customers today. The addition of Vector Atomic’s 29 pending and issued patents to IonQ’s formidable patent portfolio, and its talented team of scientists and engineers will help us reach our quantum technology goals.”

Needham analyst N. Quinn Bolton, who has a “buy” rating and $80 price target on IonQ, highlighted that Vector Atomic’s more than $200 million in government contracts and projects would help support the company’s growth in this area.

“Vector Atomic’s field-validated offerings, which include high-performance clocks, synchronization hardware, gravimeters, and inertial sensors, strengthen IonQ’s position as the only quantum company integrating computing, networking, and sensing within a single platform,” he wrote. “Vector Atomic’s portfolio of products has been designed to support mission-critical federal and national security applications.”

This deal comes on the heels of the closing of its acquisition of Oxford Ionics and its Analyst Day event, which served as a catalyst for IonQ and the broader quantum space.

Today, on the other hand, IonQ is not the top performer in the industry: that distinction goes to D-Wave Quantum, which is benefiting from a wave of bullish options bets.

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