Market Updates and Key Developments: 26 June 2024

Nvidia's Rebound Sparks Market Rally

Nvidia's recovery from a recent sell-off led to a bounce in the S&P 500 and Nasdaq Composite, ending a three-day losing streak. However, the Dow Jones Industrial Average fell nearly 300 points due to declines in Boeing, Goldman Sachs, and Home Depot. The 10-year Treasury yield remained stable as investors awaited crucial inflation data due Friday. Meanwhile, U.S. oil prices dropped 1% amid concerns over Middle East tensions and summer gasoline demand.

Volkswagen's Investment in Rivian

Volkswagen is set to invest up to $5 billion in electric vehicle startup Rivian, initially contributing $1 billion with plans to invest the remainder over the next few years. This move comes as Rivian faces financial pressure from losses and cash burn. Volkswagen follows Ford as the second legacy automaker to invest in Rivian, with Ford having sold most of its stake in 2023. Rivian's shares surged 40% in after-hours trading following the announcement.

Economists Warn Against Trump's Economic Policies

Sixteen Nobel Prize-winning economists issued a letter warning of potential economic risks if former President Donald Trump were to be re-elected, citing concerns about reigniting inflation. They praised Joe Biden's economic agenda as vastly superior and cautioned against Trump's fiscally irresponsible policies, which they believe could lead to renewed inflationary pressures.

Federal Reserve's Potential Rate Hike

Federal Reserve Governor Michelle Bowman expressed readiness to raise interest rates if inflation does not show signs of decline. While acknowledging the potential for future rate cuts if inflation trends towards the Fed’s 2% target, Bowman emphasized the need for more substantial evidence before easing monetary policy. Her stance reflects the prevailing sentiment among Fed policymakers who seek stronger confirmation of a downward trend in inflation.

Nvidia's Recent Sell-Off and Short Sellers' Gains

Nvidia’s sharp sell-off over the past three sessions has resulted in nearly $5 billion in paper profits for short sellers, according to Ortex Technologies. The stock has dropped 13% and lost $430 billion in market capitalization since June 18. Short sellers saw a $2.40 billion gain from a 6.6% drop on Monday alone, marking the highest one-day gain since Ortex began tracking data in 2019. Some market participants attribute Nvidia’s pullback to a rotation out of high-flying AI stocks into other sectors as the year progresses. Despite recent declines, Nvidia’s significant role in the AI industry has driven its stock up 145% this year, making it the second-best performer on the S&P 500.

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