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Tech Leaders Surge Amid Downturn

Plus500 | Wednesday 27 March 2024

On Tuesday, March 26th, 2024, the New York stock market experienced a downturn after recent highs

While some tech leaders saw gains, overall sentiment remained cautiously optimistic amidst economic uncertainties. 

Notably, former President Donald Trump's social media venture, Truth Social, made its debut, adding to market intrigue. Let's dive in:

An illustration of trading charts

Tuesday’s Market Reversal

Key New York Indices experienced a downturn on March 26th, 2024, continuing the recent downtrend that came on the back of record-high share values seen in February and March. The S&P 500 decreased by almost  0.3%, while the tech-heavy Nasdaq (US-TECH 100) had marked a 0.4% drop by the ring of the closing bell. Rounding out the pack, the Dow Jones Industrial Average (USA 30) fell by nearly 0.1%.

However, a few important tech leaders bucked the trend with an increase in their stock prices. Micron Technology (MU) jumped by 1.3%, beating the all-time record high set just the day before, March 25th. Data-storage sector firm Seagate Technology (STX) also joined the party with an over 7.3% rise, while electric vehicle (EV) industry giant Tesla (TSLA) climbed by 2.7%.

Despite yesterday's broad-based drops, the picture isn't all negative. According to some analysts, the general market mood among investors remains optimistic, with little concern about a substantial market correction. One of the proximate factors for this sustained positivity could be the continuing demand for semiconductor chips, which has kept companies like Nvidia (NVDA), Micron, and Broadcom (AVGO) in the zone of genuine earnings growth. 

Recent American economic indicators provide further support for this upbeat outlook, as the latest data have revealed robust demand for durable goods and a significant increase in home prices. The findings may be seen by Wall Street traders as evidence of a favourable environment for risky assets. However, the continuation of these positive trends is far from guaranteed; markets the world over can be known at times for setbacks and surprises. One surprise, albeit a potentially positive one, came from the direction of former United States President and current Republican Party candidate Donald Trump. (Source: The Wall Street Journal)

Former President Shakes Up Wall Street

Trump's latest debut on the public markets was an eventful one by all accounts. The shares of Trump Media & Technology Group, the corporate entity overseeing Trump's social media venture, Truth Social, marked a 16% rise in value on its inaugural trading day, March 26th, under its new ticker symbol, DJT. At one point earlier in the course of Tuesday's trading session, the stock witnessed a 50% increase.

This surge came following the completion of a merger with Digital World Acquisition Corp, a special-purpose vehicle that had been listed since 2021. The firm's shareholders had greenlit the merger in the preceding week. At the market's close on Tuesday, Trump Media boasted a market capitalization of approximately $8 billion, with shares settling at $57.99.

The genesis of Truth Social emerged after the former president faced expulsion from major social media platforms, including Facebook (META) and  X (formerly Twitter), post the January 6 Capitol riots in 2021. Despite the later removal of these bans, the Donald forged ahead with Truth Social, retaining a substantial ownership stake of around 60%, valued at an estimated $5 billion.

However, Trump's financial ambitions are currently on hold due to the terms of the merger agreement. Stakeholders, including Trump himself, are subject to a mandatory six-month lockup period before they can sell or transfer their shares, barring any special dispensation by the company's board.

Financial disclosures revealed that Trump Media suffered a $49 million loss between January and September of 2023, with revenue amounting to $3.4 million. Despite yesterday's promising start, some investors are reportedly already betting against the prospect of Truth Social's continued rise, so how this controversial share's trajectory will play out in the near- to mid-term is highly uncertain.

In Conclusion

In summary, the March 26th, 2024 market reversal in New York reflected ongoing volatility, with indices declining after recent highs. While some tech stocks saw gains, overall optimism was tempered by economic uncertainties. The debut of Donald Trump's Truth Social added intrigue, but uncertainties persist regarding its future amidst financial challenges. Investors are navigating a dynamic landscape marked by unpredictability.

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