(Bloomberg) — Tech mega-cap stocks gained momentum as the Nasdaq 100 hit a record high in the first half and Apple hit the $3 trillion milestone.
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Traders decided to see the glass half full as data showed inflation was easing, even at the expense of growth. Tech companies have bolstered their leadership amid the rise of artificial intelligence, further boosting stock prices this year. Big banks posted their first monthly gains since January after passing the Federal Reserve’s (Fed) stress test. Later in the day, JPMorgan Chase, Wells Fargo, Morgan Stanley and Goldman Sachs Group all announced dividend increases.
Since the beginning of the year, the Nasdaq 100 has gained nearly $5 trillion in value, with tech companies defying bubble warnings by nearly 40%. The rise of the S&P 500’s most influential group has pushed the index up 16% in 2023. The rise is even more pronounced when narrowing down to the megacap sector, which surged 74% of his.
“I still love big tech,” Raymond James chief investment officer Larry Adam told Bloomberg TV. “I believe technology continues to reinvent itself. Of course, the latest addition is AI.
The “Big 7,” which includes Apple, Microsoft Corp., Alphabet Inc., Amazon.com Inc., Meta Platforms Inc., Nvidia Corp. and Tesla Inc., will boost profits by 14% annually over the decade to 2022. rice field. Combined profits for the two companies fell more than 20% last year, but are expected to recover quickly.
The Nasdaq 100 rose more than 1.5% on Friday while the S&P 500 hit its highest level since April 2022. US equity benchmarks hit their best first half since 2019. Nvidia, which nearly tripled this year, is up about 3.5%.
If history is any guide, this year’s Nasdaq 100 strength will continue for the rest of 2023.
The average return for a year that starts with an index of at least 10% is about 14% in the second half, but shrinks to an 8.3% gain in the first half after gaining more than 20%, according to the analysis. Data compiled by Bloomberg.
Market interest in the power of generative AI could potentially dampen sentiment this year, including recession fears, rising inflation levels, prospects for another Fed rate hike, geopolitical risks, debt ceiling debate, and fiscal collapse. It has overcome every major problem that exists. Few local banks.
AI’s rise has been compared to the dot-com bubble of 2000, when the market was driven by a similarly narrow range of tech stocks before the crash, but BlackRock’s Tony Despirito sees profit growth coming said.
“The demand is really real,” said Despirito, the firm’s chief investment officer for U.S. fundamental equities. “It’s a contrast between AI and what’s happening in his year-old metaverse, or virtual reality. The orders are there.”
Still, after such a surge, valuation concerns have mounted, fueling a recent surge in bearish bets on big tech companies. Data compiled by S3 Partners show short-selling as a percentage of tradable stocks is near a 12-month high for Microsoft, Tesla and Amazon.
“Be selective”
“We don’t think the AI trend is a bubble, but the strong rally so far this year has encouraged investors to pick AI-related stocks,” said Sundeep Gantry, equity strategist at UBS Global Wealth Management. I am advising you,” he said. “From a positioning perspective, we recently ended the self-help theme as we see improved risk-reward in mid-cycle industries (software, internet) and high-tech laggards.”
Mark Newton of Fundstrat Global Advisors said the market rose further in mid-to-late July ahead of a possible minor correction heading into August, barring evidence of technical deterioration. It is highly likely that
“Until evidence of a more prevalent overbought situation merges with more bullish sentiment, and evidence of fading defensive and technical ranges, when technical trends are largely unimpaired. And it would definitely be wrong to consider abandoning this rally based solely on overbought conditions,” Newton said. I got it.
The tech sector on Friday also benefited from subdued bond market activity. The 10-year U.S. Treasury yield fell to around 3.8%. The dollar has weakened, widening losses this year.
Key indicators of US inflation slowed in May, and consumer spending was also sluggish, suggesting that the economy’s main engine is starting to lose some momentum. The Personal Consumption Expenditure Price Index, one of the Fed’s preferred inflation measures, rose 0.1%. The measure was cut from a year ago to 3.8%, the lowest annual growth in more than two years.
Krishna Guha, Vice Chairman of Evercore ISI, said: “The May PCE report released today is relatively benign from the Fed’s point of view, and ultimately the Fed will raise rates just one more, not two more.” “We are leaning towards raising rates.” “This should moderate the recent rally in yields slightly and favor big tech stocks.”
Elsewhere, Brent Oil posted its longest quarterly loss in more than 30 years, amid persistent concerns about strong supply and demand.
Global indicators settled below $75 a barrel on Friday, marking their fourth straight quarter of losses, while the West Texas Intermediate posted its first consecutive quarterly decline since 2019.
The main movements in the market are:
stock
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As of 4 p.m. New York time, the S&P 500 was up 1.2%.
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Nasdaq 100 rises 1.6%
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Dow Jones Industrial Average gains 0.8%
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MSCI World Index rose 1.1%
currency
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The Bloomberg Dollar Spot Index fell 0.3%.
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The euro rose 0.4% to $1.0913.
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The British pound rose 0.7% to $1.2699.
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The Japanese yen rose 0.3% to 144.27 yen to the dollar.
Cryptocurrency
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Bitcoin almost unchanged at $30,400.96
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Ether rises 4.3% to $1,927.95
bonds
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The 10-year Treasury yield fell three basis points to 3.81%.
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German 10-year bond yields fell two basis points to 2.39%.
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UK 10-Year Bond Yield Barely Changed at 4.39%
merchandise
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West Texas Intermediate crude rises 1% to $70.57 a barrel
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Gold futures rose 0.5% to $1,927.60 an ounce.
This article was produced in partnership with Bloomberg Automation.
–With the help of Rob Verdonk, Tasia Sipahtar, Robert Brand, Denica Tzekova, Peyton Forte, Ryan Vlasterika, Carmen Reinicke and Elena Popina.
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