US stock market breaks out! New stock exchange is coming!

Big news from the US capital market!

According to the Wall Street Journal, a group backed by BlackRock and Citadel Securities plans to build a new stock exchange in Texas, USA, aiming to challenge the New York Stock Exchange and Nasdaq.

An important background is that the US stock market has continued to rise in recent years, with the Nasdaq index reaching the 17,000-point mark at the end of May. Since 2009, the index has risen nearly 10 times.

Analysts pointed out that the establishment of a new stock exchange is expected to increase market competition and will have an impact on the market share of existing exchanges, but will provide investors with more choices.

New Stock Exchange

According to the Wall Street Journal, people familiar with the matter said that a group backed by BlackRock, Citadel Securities and other investors is planning to launch a new national stock exchange in Texas, USA, aiming to challenge the heavy supervision of the New York Stock Exchange and Nasdaq.

The new Texas Stock Exchange, the Texas Stock Exchange (TXSE), has raised about $120 million and plans to submit registration documents to the US Securities and Exchange Commission (SEC) later this year.

TXSE Chief Executive James Lee said the exchange will try to attract companies seeking relief from increased compliance costs at the New York Stock Exchange and Nasdaq. He said that while TXSE is fully electronic, it will be headquartered in Dallas to support metropolitan areas that have gained financial jobs from companies such as Goldman Sachs Group Inc. and Charles Schwab Corp.

James Lee said TXSE aims to have its first trade in 2025 and an initial public offering in 2026. But any effort to take on the New York Stock Exchange and Nasdaq will face tough challenges, and other emerging exchanges have also faced significant obstacles in their efforts to enter established markets.

A spokesman for Citadel Securities confirmed that the company is an investor in the project. However, BlackRock declined to comment on the matter.

TXSE said on its website: "The Texas Stock Exchange will focus on enabling U.S. and global companies to access the U.S. equity capital market and will provide a trading and listing venue for listed companies and growing exchange-traded products. TXSE will be a fully electronic national securities exchange and will seek to register with the U.S. Securities and Exchange Commission."

In the United States, stock trading is mainly concentrated in three major exchanges, namely the New York Stock Exchange (NYSE), the Nasdaq Stock Exchange (NASDAQ), and the American Stock Exchange (AMEX).

Among them, the New York Stock Exchange is the world's largest stock exchange by market value, with more than 1,900 listed companies and a total market value of more than 38 trillion U.S. dollars; the Nasdaq Stock Exchange is the world's second largest stock exchange by market value, with more than 3,300 listed companies and a total market value of more than 31 trillion U.S. dollars. The American Stock Exchange is relatively small in size, with more than 240 listed companies and a total market value of more than 100 billion U.S. dollars.

On the evening of June 3 this year, a technical failure occurred at the New York Stock Exchange, causing the Class A shares of Berkshire Hathaway, owned by Buffett, to plummet by 99.97%. On June 4, the New York Stock Exchange cleared all erroneous transactions of Berkshire Hathaway, and transactions to buy Buffett's company stocks at low prices were invalid. In addition, the New York Stock Exchange also cleared erroneous transactions related to Bank of Montreal, Mexican Grill, Barrick Gold, etc. The New York Stock Exchange said that the reason for the abnormal quotation was a technical problem in the price range, which has been resolved.

On May 30, the US stock market also encountered technical problems. During the day, the S&P 500 and the Dow Jones Industrial Average suddenly stopped real-time quotations for nearly 80 minutes, but individual stock transactions were not affected.

Nasdaq rose nearly 10 times

This year, US stocks have repeatedly set new highs. On May 15, the S&P 500 broke through 5,300 points; on May 16, the Dow Jones Industrial Average broke through the 40,000 integer mark for the first time in history; on May 28, the Nasdaq closed above 17,000 points for the first time. Since 2009, the Nasdaq has risen nearly 10 times, the S&P 500 has risen nearly 5 times, and the Dow has risen more than 3 times.

Recently, the U.S. stock market has continued to fluctuate at a high level. As of the close of June 4, the Dow Jones Industrial Average rose 0.36% to 38,711.29 points; the Nasdaq index rose 0.17% to 16,857.05 points; and the S&P 500 index rose 0.15% to 5,291.34 points. In terms of individual stocks, Nvidia rose more than 1%, and its share price continued to hit a record high, with a total market value of US$2.86 trillion; Apple rose 0.16%, and its closing market value approached US$3 trillion.

TF Securities (601162) pointed out that since October 2023, the overall returns of the seven technology giants in the S&P 500 have been significantly higher than the rest of the stock portfolio, indicating that U.S. stocks have a higher exposure to larger weighted stocks. The ratio of the S&P 500 equal-weighted index to the weighted index also broke through the low point in September 2020, and was once close to the historical bottom since 2009. Overall, it reflects that the U.S. stock market is in a highly crowded state. In the future, it is necessary to pay attention to the possibility of a sharp decline in the major weighted stocks of the U.S. stock market when the VIX index is low and the skewness index is upward.

In terms of investment strategy, Tianfeng Securities said that under the baseline assumptions of a soft landing of the U.S. economy and continued loose financial conditions index, the U.S. stock market may maintain an upward trend in the medium term, but there may be signs of overheated market sentiment in the short term, and it is possible to maintain a periodic caution on the U.S. stock market.

Wall Street analysts also have obvious differences on whether the U.S. stock market can continue to rise in the coming months. Jeremy Folsom, an investment strategy analyst at Wells Fargo, said recently that the S&P 500 index will hit a record high of 5,700 points by the end of next year, partly due to the sharp rises before and after the U.S. presidential elections in 2012, 2016 and 2020. Jeremy Folsom further explained that from the beginning of 2012 to the end of 2013, the S&P 500 rose 47%, and also saw sharp rises during the next two US presidential elections.

Jeremy Folsom also said, "Although cash and cash alternatives are attractive at present, we do not think it is a good place for funds to invest for the long term, given that we expect interest rates to fall as the Fed's interest rate cycle ends."

Fundstrat research director Tom Lee, known as the "Wall Street God Calculator", recently said that the stock market will receive positive support in June and can be bought on dips if there is a pullback. He expects that the S&P 500 index may rise to 5,500 points in June, driven by five positive market catalysts: bullish seasonal factors, continued anti-inflationary trends, low investor leverage, a record $6 trillion of "wait-and-see cash", and solid corporate earnings results.

JPMorgan Chase Chief Market Strategist Kolanovich said that the recovery of meme stocks is a bad omen for the overall US stock market. In a recently released report, Kolanovich reiterated his bearish view on the stock market. Although the S&P 500 is now less than 1% away from its all-time high, the strategist's target price is only 4,200 points, which is the lowest on Wall Street, which means that the index will fall more than 20% from its current level.

Brian Sozzi, Wall Street industry strategist and executive editor of Yahoo Finance, believes that the current situation of the technology industry may not be as healthy as it seems, and hot technology stocks may experience a correction this summer, and investors will re-evaluate their valuations.