LongPort Morning Brief (240726)｜U.S. tech stocks experienced significant intraday volatility, with the Nasdaq falling for three consecutive days; unexpectedly resilient U.S. Q2 consumer spending led to gains in cyclical Dow and small-cap stocks.
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1. Except for Tesla, the "Magnificent Seven" tech stocks all declined, with significant intraday volatility. Nvidia fell about 7% before briefly turning positive, ultimately closing down 1.7%. Tesla rose as much as 4.6% before settling for a nearly 2% gain.
Dolphin Research's take: Initially, the market feared an economic slowdown worse than expected, with rate-cut expectations brought forward and the magnitude increased. However, Q2 economic growth proved unexpectedly resilient, accelerating from 1.4% to 2.8% quarter-on-quarter.
The positive economic data also reassured investor confidence. While major indices initially fell across the board, the cyclical Dow and more economically sensitive small-cap stocks ultimately closed higher, leading to a valuation squeeze focused solely on the Nasdaq and tech giants. With major US companies reporting earnings next week, expect continued turbulence.
2. East Buy announced last evening that its star influencer Dong Yuhui is stepping down, with RMB 76.59 million paid for 100% equity in Yu Hui Tong Xing. New Oriental's stock fell over 5%.
Dolphin Research's take: Followers know KOL livestreaming is a business model where influencers profit while companies foot the bill. When initially covering New Oriental, Dolphin Research didn't factor livestream e-commerce into its valuation.
Dong Yuhui's departure was expected, but key questions remain:
A. Selling a livestream channel with 20 million fans for under RMB 100 million—is this fair for East Buy's $1.4 billion market cap? Could this be undervaluing public assets?
B. Without Dong, how much value does Yu Hui Tong Xing retain?
C. Reports suggest Yu Minhong provided the ~RMB 80 million, effectively gifting the venture to Dong. Given their reportedly strong relationship, might Dong reciprocate with equity or is there undisclosed ownership?
These are speculative questions for discussion.
3. US Q2 GDP beat expectations at 2.8% QoQ, while core PCE inflation eased to 2.9%—still above forecasts. The economy showed resilience as inflation moderated slightly. June durable goods orders unexpectedly plunged 6.6% MoM, the first drop after four straight gains, led by a collapse in non-defense spending.
Dolphin Research's take: Breaking down GDP drivers—consumer demand, business investment, government spending, and net exports—business investment surged this quarter. Despite declining residential investment, inventory buildup began, signaling the end of destocking and a positive growth contributor.
Consumer spending remained surprisingly strong—goods consumption turned positive while services growth slowed less than expected, contributing 1.6 percentage points to the 2.8% annualized growth.
Deficit-driven government spending also rose, adding 0.5 percentage points. Excluding net exports' usual drag, these three sectors drove the 2.8% growth, far exceeding expectations.
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