Stocks are in for a bizarre week as the Nasdaq suffered a technical glitch.

We unpack top market trends and highlight top stocks.

Stocks – Big Week Ahead

The bond market will have some opportunities for volatility ahead of decisions by the Federal Reserve and the Bank of Japan later this week.

Morgan Stanley strategists are considering if higher interest rates will start to play a bigger role in determining valuations for large caps.

On LSEG Datastream, the reading of the forward price-to-earnings ratio for the S&P 500 has just hit a two-year high of 20.5, while the index itself has gained better than 8% for 2024.

As more ‘risk-free’ yields start to rise, the return streams from the more temperamental stocks start to look better – potentially taking pressure off valuations.

Stocks – Big Opportunities

Small-cap stocks have shown a greater negative correlation to the yield curve so far this year compared to large-caps, suggesting smaller stocks may feel a slight pinch more maternally to a twist in rates.

Morgan Stanley strategists are also watching closely to see whether the 10-year yield drops below its 200-day moving average of about 4.195%.

Any significant dip could underpin higher equity valuations.

Tesla climbed 6.7% as the company raised the price of its Model Y electric vehicles by just over $2,177 in several European nations, effective March 22.

A little later in the day, Nvidia rose 1.2% as the chip giant began its annual developer conference.

Wall Street will be listening for updates from CEO Jensen Huang on new chip technologies.

Stocks – Nvidia in focus

Nvidia saw another boost to its price.

Meanwhile, fellow tech giants Micron Technology and Intel rose by 1.5% and 0.3% respectively, to lift the Philadelphia Semiconductor Index by 0.5%.

Late in February, a short-sighted excitement about artificial intelligence sent Wall Street soaring to new highs for the year.

This came before it took a stumble last week; indeed, investor caution around higher-than-expected inflation readings adjusted expectations for Federal Reserve rate cuts, but the probability of a rate cut in June now stands at 59% after 71% last week.

In the wake of the inflation numbers, Goldman Sachs cut its forecast to three cuts in 2024 instead of four.

Stocks: Nasdaq glitch

Nasdaq said it resolved a technical restoration issue that had interfered with connectivity and stock orders after more than two hours in outage mode.

The Dow Jones Industrial Average was up 0.47%, the S&P 500 by 1.00%, and the Nasdaq Composite by 1.40%.

The stock of Xpeng rose 2.9% with the news that the Chinese EV maker is launching a sub-brand of more affordable lookalike electric vehicles as it seeks to deal with price pressures in its home market.

Boeing fell 1.0% after it disclosed a grand jury subpoena from the federal government’s criminal investigations unit following a recent emergency landing with an Alaska Airlines flight.

Leading chipmaker Super Micro Computer, which joined the S&P 500 last week, lost 5.6% of its market value on March 18.

More New York Stock Exchange-listed companies rose than fell, but more Nasdaq-listed shares fell than rose.

Both the broad S&P 500 index and the Nasdaq Composite rose to new highs and lows, respectively.

Stocks: Euro markets are lower

European stocks eased lower on Monday, with the pan-European STOXX 600 index edging down 0.1%, as Europe’s telecoms rallied sharply and German yields moved higher following an expected rise in euro zone inflation in February.

Ireland’s ISEQ index rose 0.1% compared with other European bourses, which underperformed.

Telecoms suffered the worst session in three months with a 1.4% fall, while the automobile and parts sector rose 0.9%.

Energy stocks added 0.5% after Brent crude prices popped above $86 a barrel for the first time since November as Ukrainian assaults on Russian energy targets triggered a price jump.

A bigger lift came in tech stocks, which added 0.4% as anticipation swirled ahead of Nvidia’s annual developer conference.

February’s eurozone inflation report came in at the consensus forecast of 2.6% year over year and 0.6% month over month, leaving ECB hopes of a first-rate cut unchanged.

Germany’s benchmark, 10-year government bond returned 2 basis points, following the ECB, with its futures yield ending at 2.458%.

Markets are expecting a reduction in interest rates by 83 basis points in 2024 after ECB policymaker Pablo Hernandez de Cos, the governor of the Bank of Spain, suggested the ECB may start cutting rates in June of next year.

The virtual policy meeting on Thursday from the US Federal Reserve, as well as meetings from the Bank of Japan and Bank of England, will be closely watched; all central banks are keen to indicate where monetary policy is leaning globally.

Stocks: Euro stocks in focus

Market-moving stocks included the Polish fashion company LPP, which rose 20.5%, recovering a portion of the losses seen earlier in the week, while Signify NV and Alstom rose 2.0% and 6.4%, respectively, after receiving positive analyst ratings.

Logitech notably dropped 6.8% after the company said its CFO, Charles Boynton was leaving at the end of June.

Gold Trading: Discover 10 Powerful Market Facts

Goldman Sachs reported that hedge funds increased their exposure to bank and financial stocks by the largest amount in at least a year, as three bank-stock indices in Europe and the US hit new highs.

In an analysis of hedge-fund activity for the week ending last Friday, the Wall Street Journal reported that financial stocks in North America, Europe, and Asia’s emerging markets were the most popular for the second week in a row.

The STOXX Europe 600 banks index is up 8.3% so far in 2024 to levels not seen since 2019, while the Dow Jones banking index is up 6.6% this year from the start of the year.

Banking stocks

Many of them were amassing long positions in banking and capital markets firms (reversing their previous short bets) and adding to long positions in so-called consumer finance companies.

The report indicated that hedge funds maintained a net short position on insurance companies.

Banking stocks took a major hit in March 2023, following the failure of the US regional bank Silicon Valley Bank, and Deutsche Bank.

All reported record losses with March marking the worst month for the European banking index since the outbreak of the pandemic.

But after a significant upturn since then, European and US bank stocks have begun the second quarter strongly, with the ‘14 largest banks in Europe and US shares having climbed to the highest levels since March 2022, according to Bloomberg.

Goldman Sachs’ prime brokerage desk explains that hedge funds have fairly small net exposure to financials relative to the rest of the global equities market.

On March 18, NatWest said it would seek its shareholders’ approval for the buyback of up to 15% of its shares still owned by the UK government, to speed up the privatization of the bank, which was part-nationalized following its rescue during the 2007-2009 financial crisis.

Ahead of its annual general meeting in April, NatWest announced: “Shareholders are asked to approve a special resolution authorising the company to purchase up to 15% of the shares of the company currently held by the UK government during the course of the next 12 months.”

At present, state ownership of the bank accounts for about a third of what used to be Royal Bank of Scotland, now known as NatWest, with the state gradually slimming down its remaining holding, including a likely public disposal of shares as early as June this year, and complete divestment by 2026.

The NatWest buyback plan is dependent on regulatory changes that are expected later this year, which would make it easier for companies to buy back more of their stock from a principal owner.

If NatWest were to acquire 15% of its shares at their current market value, the deal would cost about $3.8 billion.

It had whittled its stake away from its initial 84%, selling it off to institutional investors and then to NatWest itself.

To jump-start the privatisation and re-spark UK stock investment, Britain’s finance minister Jeremy Hunt in November announced plans to put shares back up for sale to individuals.

Also, at NatWest’s forthcoming annual general meeting, shareholders will vote on the formal ratification of the appointments of Rick Haythornthwaite as chairman and Paul Thwaite as chief executive.

Haythornthwaite took over in June last year after the surprise departure of the chief executive, Alison Rose in July 2020.

Nasdaq, the exchange that lists shares of many large US tech companies, announced that it had resolved a glitch in its trading system.

The error had tempered opening day trading activity on the exchange for more than two hours early Monday, saying all systems were now up and running.

Speculation about the nature of the glitch was severe, but Nasdaq remained tight-lipped on the exact cause of the fault, blaming a problem with what’s known as the matching engine—the software that pairs a buy order with the corresponding sell order. Two months ago, Nasdaq suffered a similar technical disruption.

“With respect to the earlier issues of the matching engine, systems are healthy, and all systems are operational,” it said on its website, promising that it would ‘issue a post mortem’ on the problems at a later date.

Nasdaq is the market where Apple, Tesla, and Nvidia stocks trade, among others.

A technical error inside a trading platform can send markets skidding, undermine trader confidence, and attract the attention of regulators such as the Securities and Exchange Commission (SEC).

Quantcast, a site tracking source, says that the issue was present for barely 0.8% of total exchange trading volume.

Glitches in stock spreads—the difference between the ask (the lowest price at which a seller is willing to sell) and the bid (the highest price at which a buyer is willing to purchase)—were tracked by market analysts over the outage period.

Some analysts noted that during this window the ask price substantially undervalued the bid, indicating a drop in market liquidity.

A trader in Berlin blamed a ‘blip’ at 6:40 am ET in the price of US chip maker Nvidia, a sell-off that he believed was the result of the Nasdaq taking in erroneous stock quotes.

After the glitch, Nvidia’s stock tumbled momentarily from about $902 to $896, according to Refinitiv data, then bounced back, with the company’s shares later rising about 3.5% to $908.67.

The Nasdaq Composite Index also ratcheted up about 1.3%.

Both Cboe and the New York Stock Exchange then notified the market of what they called self-help.

Technically, that meant that until Nasdaq fixed its problem, it would no longer guarantee the delivery of trade orders to Nasdaq.

“The system is built with redundancies. Brokers can go on other exchanges,’ Sam said. ‘So the market, fundamentally and at its core, can still continue to operate.’) Later on Monday, Cboe and the New York Stock Exchange called off their actions.

The fault affected orders submitted through so-called ‘RASH FIX’ (an order processing system) of the Nasdaq system, which is the acronym for ‘Really Average Scheduled Trade Fix’, that follows FIX protocol – a standardised language for the electronic exchange of trades in the world’s securities markets.

Despite these problems, massive exchange outages are still rare.

An earlier system error involving transactions was caused by a ‘bug in the code’ that hit Nasdaq in December, and delayed stock orders, and involved more than 50 clients.

A glitch at NYSE last year derailed the opening auctions of a slew of stocks, leading to hundreds of trading halts and widespread confusion over whether orders had been filled at the right price – NYSE cancelled trades in more than 250 securities