🎙️ It Isn't Just Big Tech

The percent of stocks (82.2%) that have closed about their 200-day moving average is at its highest since September 2021, signaling that it’s not just Nvidia doing all the work.

That metric peaked in April 2021 before slowly falling into 2022. Generally, breadth deteriorates around a major market top. But its recent expansion confirms we might have more room to run higher.

💭 Meanwhile, markets shrugged off another above-expectations inflation report today. It’s the first time since the Fed began hiking interest rates that stock indexes rose after inflation came in hotter than anticipated.

More below.

— Matthew & Shawn

Here’s today’s rundown:

Today, we'll discuss the biggest stories in markets:

• It isn’t just big tech driving market gains

• Telegram’s CEO breaks his silence

This, and more, in just 5 minutes to read.

Chart of the Day

In The News

📈 It Isn’t Just Big Tech Driving Market Gains Higher

Against popular belief, this market isn’t just about a few wonderful, mega-cap companies.

A broad group of companies has fueled the recent climb to record highs, even as monster companies like Apple and Tesla have sunk this year. The equal-weighted S&P 500 — measuring each company equally rather than by its market cap — rose to a record in the past week. 

• About 20% of stocks in the S&P 500 hit new 52-week highs in the past week, the largest share since May 2021.
  

• It’s clearer by the week that investors are behind the idea that the economy has weathered the worst of this cycle’s interest rates, clearing a path for larger gains in small-caps and other risky segments of stocks. The S&P 500 has risen about 33% over the past year.

Broaden up! A broader rally often bodes well, reducing fears that only a handful of big tech companies drove the market higher. 

• “With inflation coming down and the Fed no longer fighting you, it’s just a better long-term case for risky assets,” said one chief investment officer.
  

• Gold and bitcoin have enjoyed rallies to new all-time highs in recent weeks, and many tech stocks are up double-digit percentages in 2024 after a strong 2023. Rate-sensitive shares in utilities and real estate have barely budged, though industrials and financials have charged higher this year.
  

• Meanwhile, small caps like Super Micro Computer (300%), MicroStrategy (126%), and Carvana (60%) have soared in 2024. 

Why it matters:

Generally, a broadening rally signals strength and a continued march higher. But on the flip side, some investors are urging caution as riskier stocks have soared, meaning we could be at or near a peak. 

A few possible paths: If inflation struggles to dip to the Fed’s target (we just had a third consecutive month of unexpectedly hot inflation data) and growth remains strong, rates might stay higher for longer. 

Because smaller companies typically rely more on debt financing and must borrow at higher rates, they’re particularly sensitive to changes in interest rates, leaving the ongoing breadth of this rally largely dependent on interest rate expectations. (We’ll be covering the best sectors to invest in amid rate cuts in tomorrow’s We Study Markets Pro.)

• “Everyone thought we slayed the beast of inflation,” noted one Wall Street analyst. “Outside of large-cap stocks with fortress balance sheets, higher rates will have an effect.”

Read more on market breadth

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🗣️ Telegram’s CEO Makes Rare Public Appearance

It’s been seven years since Pavel Durov last did a public interview. But the secretive billionaire recently broke his silence.

Durov, the CEO of Telegram — an encrypted messaging app and one of the world’s biggest social media platforms — emerged from the shadows to speak with the Financial Times, capturing investors’ attention.

• He hinted at a potentially blockbuster IPO for Telegram, which boasts over 900 million users and makes “hundreds of millions of dollars per year” in revenue from advertising and premium subscriptions.
  

• While not yet profitable, Durov, who owns 100% of Telegram, claims he’s received offers valuing the company at over $30 billion.

Mixed feelings: Based in Dubai and led by the Russian-born Durov, Telegram reportedly has just 50 full-time employees despite exploding in popularity.

Depending on who you ask, it’s a critical tool for preserving free speech, especially in war zones and autocracies. For others, the light-touch moderation is seemingly a hotbed for illicit activity and brewing extremism.

• After being labeled the “Mark Zuckerberg of Russia” in 2007 for his first social media company, Durov fled the country a year after starting Telegram in 2013.

Why it matters:

Telegram is huge but still about half the size of its messaging app peer, WhatsApp, which has more than 1.8 billion monthly users.

With an expected U.S. IPO looming, the free market will decide Telegram’s value. Investors must weigh the company’s rapid growth against its lack of profitability, small staff, and hazy reputation.

• Following Reddit’s lead, Telegram would reportedly carve out shares from its IPO for its most loyal users, hoping to merge its most passionate supporters with its shareholder base instead of primarily just selling shares to institutional investors.

Read more

More Headlines

🐂 Stocks rally after a hot inflation report — is that bullish?

✈️ Why Boeing is in more big, big trouble 

📈 Mark Cuban’s five best passive income ideas

😨 Western countries are more pessimistic about AI

👀 Sam Altman is back on OpenAI’s board

🗳️ U.S. intelligence services believe China has used TikTok to influence elections

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Quick Poll

Yesterday, we asked: Which do you expect to support your retirement the most?

— One reader who’s relying on real estate noted, “Everything else is unpredictable.”

— On team 401(k), a reader spoke for many: “Just retired early…sure hope the money holds out.”

— As for other strategies, a reader said: “I buy BTC directly for my retirement.” Another said they’re relying on a mix of everything: “For the average person, it takes a shocking amount to fund non-work for more than a few years. SSI helps but doesn’t cut it. 401(k)’s and trad IRAs are heavily taxed on withdrawal. Inflation at any rate steadily reduces the treasure store. Gotta pull from every resource available to make a go.”

— Another simply stated, “Add inheritance to the list.”

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