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CNBC Daily Open: Mega money Musk

Brendan McDermid | Reuters

This report is from today's CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

What you need to know today

More records, Dow lags
The S&P 500 and the Nasdaq Composite inched their way to a fourth consecutive record close as the latest data showed inflation was easing. Chipmaker Broadcom soared after it delivered better-than-expected second-quarter earnings and announced a 10-for-1 stock split. The Dow Jones Industrial Average was the laggard, falling 65 points, dragged down by Salesforce and Amazon. The yield on the 10-year Treasury slipped after the producer price index unexpectedly fell. U.S. oil prices declined.

Mega bucks
Tesla shareholders voted to ratify CEO Elon Musk's 2018 pay plan at the annual meeting, despite a Delaware judge ordering its rescission five months earlier.  The vote, a public relations win for Musk, doesn't override the court's ruling but may aid his future efforts to secure performance options. The package, once valued at $56 billion, was deemed "unfathomable" by the court. Judge Kathaleen McCormick criticized Tesla's board for lacking independence from Musk, inadequate negotiation and failing to fully inform shareholders before the initial vote. 

Reasonable debt  

Janet Yellen, U.S. Treasury Secretary, said the ballooning national debt that's currently at $34.7 trillion is manageable. "If the debt is stabilized relative to the size of the economy, we're in a reasonable place," Yellen told CNBC's Andrew Ross Sorkin during a "Squawk Box" live interview. "The way I look at it is that we should be looking at the real interest cost of the debt. That's really what the burden is." Net interest costs totaled $601 billion during the 2024 fiscal year — more than four times the spending on education. 

Surprise data
Producer prices unexpectedly fell in May, declining 0.2%, another indication inflation is pulling back. Dow Jones estimated a 0.1% rise. Compared to a year ago, the producer price index in May rose 2.2% after rising 2.3% in April. In other economic news, initial claims for unemployment insurance jumped to 242,000 for the week ended June 8. That's the highest level since August 2023. 

Trump CEO huddle
Former President Donald Trump met with 80 CEOs in Washington, promising tax cuts and reduced business regulations if reelected. He pledged to reinstate economic policies from his first term and proposed eliminating taxes on worker tips. The meeting, part of the Business Roundtable's quarterly event, aimed to rebuild ties strained after Trump's controversial comments in 2017 and the Capitol riot in 2021. Prominent attendees included Apple CEO Tim Cook and JPMorgan Chase CEO Jamie Dimon. 

[PRO] Trillionaires club
Chipmaker Broadcom is on course to "join the trillionaires club," Bank of America is predicting. BofA raised its price target, implying a 34% upside from Wednesday's close. Broadcom's shares soared 13% after reporting earnings that beat analyst expectations and announcing a 10-for-1 stock split.

The bottom line

Three $3 trillion companies — Nvidia, Apple and Microsoft — are vying for the title of the world's most valuable company. Meanwhile, chipmaker Broadcom is just over $200 billion away from joining the trillion-dollar club. As investors are captivated by mega-cap technology stocks, this artificial intelligence-driven surge is concentrating wealth in just a few companies.

Nvidia's remarkable 200% growth in the past year has increased its S&P 500 weighting to 6.6%, while Microsoft and Apple hold 7% and 6.4%, respectively. Evercore ISI chip analyst Mark Lipacis predicts Nvidia could eventually constitute 10%-15% of the index, a level of dominance never seen before.

In March, Goldman Sachs Research noted that "the 10 largest U.S. stocks now account for 33% of the S&P 500 index's market value," surpassing levels seen during the 2000 tech bubble. The Wall Street firm acknowledges that while "investors usually think of elevated concentration as a sign of downside risk," the S&P 500 has historically rallied more often than declined after such episodes.

BTIG chief market technician Jonathan Krinsky noted that U.S. stock markets are currently more imbalanced than at any time since 1999.

On Thursday morning, the S&P 500 was about 4% above its 50-day moving average (DMA), while only 43% of its individual stocks were above their 50-DMA. Historically, such a divergence occurred only in December 1999, just before the tech bubble burst.

Krinsky cautioned that this doesn't necessarily mean the stock market indexes are on the verge of rolling over but, combined with other breadth metrics, it does warrant caution. He pointed out that despite favorable inflation data from CPI and PPI, small-caps remained unchanged, raising questions about why market breadth hasn't improved.

However, Goldman Sachs' Scott Rubner suggests there could be a "wall of money" coming into stocks in the second half of the year. He noted that roughly 9 basis points of new money enters the market every July.

"On $29 trillion in assets, that is $26 billion in modeled July inflows," Rubner wrote in a note last week. "Additionally, I am seeing a re-emergence of retail traders during summer; they tend to come around July."

That money is likely headed in one direction: mega caps.

CNBC's Jeff Cox, Lisa Kailai Han, Sara Min, Spencer Kimball, Brian Schwartz, Brian Evans, Scott Schnipper, Fred Imbert and Lora Kolodny contributed to this report.

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