Traders work on the floor of the New York Stock Exchange during afternoon trading on January 22, 2024 in New York City.
Michael M Santiago | Getty Images News | Getty Images
This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open updates investors with everything they need to know, wherever they are. Do you like what you see? You can subscribe here.
S&P 500 drops from record high
The S&P 500 briefly crossed the 5,500 point mark for the first time before ending the session lower. The Nasdaq Composite fell as Nvidia ran out of steam. The Dow Jones Industrial Average bucked the trend and posted its best day since May. The yield on ten-year government bonds rose. US oil prices traded above $82 a barrel and are on track for a second straight week of gains.
HIV shot
Shares of Gilead Sciences rose 7% after the company announced that its experimental biennial HIV prevention drug showed 100% efficacy in late-stage trials. None of the nearly 2,000 women who received the lenacapavir shot during the trial had contracted HIV, an interim analysis found. The independent data monitoring committee recommended that Gilead offer the treatment to all study participants.
Open AI Challenger
Anthropic, a leading AI competitor to OpenAI, unveiled Claude 3.5 Sonnet, the most advanced AI model to date. Backed by tech giants Google, Salesforce and Amazon, Anthropic closed five financing deals last year totaling approximately $7.3 billion. Claude 3.5 Sonnet “shows marked improvement in understanding nuance, humor and complex instructions, and is exceptional at writing high-quality content with a natural, relatable tone,” the company said in a blog post.
Trump Media stock is sinking
Former President Donald Trump’s stake in Trump Media has plummeted by more than $2 billion, from $5.6 billion at the start of the month. The company, which owns Truth Social, saw its shares fall more than 14% on Thursday. The decline of Trump Media follows the conviction of Trump, the presumptive Republican presidential nominee, on 34 felony counts of falsifying company records by a jury in New York.
Japanese shares were mixed, with the yen weakening
Japan’s Nikkei 225 fell slightly while the Topix rose after May inflation data turned out cooler than expected, threatening the Bank of Japan’s plans to raise interest rates. The yen weakened, falling below 159 against the dollar for the first time since April 29. Masato Kanda, the country’s top currency diplomat, warned of possible intervention against speculative and excessively volatile currency movements, Reuters reported. The United States placed Japan on its foreign exchange monitoring list. Elsewhere in the Asia-Pacific, Hong Kong’s Hang Seng, mainland China’s CSI 300 index and South Korea’s Kospi were all lower.
[PRO] AI real estate
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Before the European debt crisis, political motives often overshadowed economic caution. The European Union had set a budget deficit target of 3% in 1997, but in its haste to expand, Greece was admitted to the eurozone in 2001. The rest is history. After relaxing the deficit target during the pandemic, the EU executive is now again warning countries against excessive spending.
France is among seven countries exceeding the deficit limit, potentially hampering the spending plans of Marine Le Pen’s party. Le Pen, leader in the polls, has promised to reduce VAT on essential items and lower the retirement age. France’s budget deficit is expected to narrow from 5.5% in 2023 to 5.3% this year.
The debate reflects concerns in the US, where the budget deficit is expected to rise to $1.92 trillion this year, or 7% of GDP, according to the Congressional Budget Office, the independent budget watchdog for lawmakers. This represents an increase of 27% compared to the February forecast.
The additional $408 billion in spending is largely due to legislation allocating $95 billion to Ukraine, Israel and the Indo-Pacific region, along with the Biden administration’s spending on student loan relief and Medicaid. By the end of 2034, the national debt is expected to total $50.7 trillion, or 122% of GDP, compared to February’s forecast of $48.3 trillion, or 116% of GDP.
Currently, there is little indication that Republicans or Democrats will limit spending plans or tax breaks.
Roger Altman, founder of Evercore, told ‘Squawk Box’: ‘The idea of a 7% deficit in an economy this strong is dangerous… It’s trite to say it, but it may be unsustainable. If it’s not proactively resolved, eventually market forces will force it to fix it, and that will be ugly.”
“The markets seem to ignore it for a long time until they don’t anymore… At some point the markets are going to wake up and not like this. It will have a dramatic impact on government bond financing.”
As for the markets, they are showing signs of fatigue. Nvidia fell from a record high, dragging down the S&P 500 and Nasdaq. Interestingly, JP Morgan believes the bull run is due to less short selling in the major averages.
“One support for the U.S. stock market over the past year came from a decline in short interest on the two largest stock ETFs,” the SPDR S&P 500 ETF Trust and the Invesco QQQ Trust that tracks the performance of the Nasdaq-100 index . strategists led by Nikolaos Panigirtzoglou wrote. “These short interest rates have fallen in a fairly steady manner since the second quarter of 2023, hitting successive record lows,” they say.
With markets feeling stretched, short sellers could see a return.
-CNBCs Brian Evans, Kevin Breuninger, Hayden Field, Jesse Pound, Angelica Peebles, Scott Schnipper, Brian Evans, Charmaine Jacob and Lim Hui Jie contributed to this report.