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“Leaders get out in front and stay there by raising the standards by which they judge themselves—and by which they are willing to be judged.” – Fred Smith

Morning stock market summary

Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.  

Futures have been drifting lower all morning.  First, it was weaker-than-expected earnings reports in the tech/growth area (Shopify, Uber, etc). Then, Intel lowered Q2 sales guidance for the second time in less than two weeks. Now, Tesla (TSLA) is trading lower on reports of a criminal probe into claims it may have made concerning its full self-driving mode.  All of these ingredients create a perfect recipe for an excuse for investors to take a step back after the recent bounce and reassess things.  Outside of earnings, there’s little in the way of economic news today with Wholesale Inventories (10 AM) being the only report on the calendar.

We’ve become so used to US stocks leading the rest of the world in recent years, but this morning, there’s been a slight shift in the balance of power.  Europe’s benchmark STOXX 600 is up 0.25% this morning for its fourth straight day of gains. In the process, the index has taken out its prior record high from late March, erasing all of the declines from April.

Meanwhile, the S&P 500 also closed out yesterday with its fourth straight day of gains but remains 1.5% below its record high from the end of March.

So, what explains the disparity in performance? The chart below shows the performance of STOXX 600 groups since the end of March when it last made a record high.  Leading the way, Basic Resources, Banks, Energy, Utilities, and Drug Stores have all rallied over 3%.  Most of these groups have larger weightings in the STOXX 600 than in the S&P 500 and therefore, they have provided a bigger ‘kick’ to the index’s performance.  Meanwhile, Technology which isn’t nearly as heavily weighted in Europe as it is in the US is down 1.26%.

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