The DOW JONES is up 0.26% to 33,941 points, while the S&P 500 is up 0.12% to 4,381 points. The NASDAQ 100 rose 0.10% to 13,603 points.
The stock market is approaching the end of the first half of 2023 with a strong performance. The S&P 500 is up 14% year-to-date. In the meantime, The Nasdaq Composite is up almost 30% and is heading for its best first half since 1983. as growing optimism about artificial intelligence has given a boost to a variety of tech companies and chipmakers. The Dow Jones is behaving more modestly, up 2%.
“The economic surprise has really been one of the main reasons US equities have performed so well over the last few months,” Daniel Lam, head of equity strategy at Standard Chartered Wealth Management, told Bloomberg Television. “But as the hurdle gets higher and higher, it becomes harder to clear, and investors could move to other regions like Japan and Asia.”
The second half of the year could be volatile. “The Fed, the data, and the AI story must be right for stocks to rise, as the S&P 500 has already priced in a near-perfect landing when anything goes wrong could lead to a recession.” , Jason Draho , Head of Americas asset allocation at UBS Global Wealth Management.
The S&P 500 closed near zero on Wednesday as investors digested Federal Reserve Chair Jerome Powell’s recent comments on the tightening cycle. Powell, who is in Madrid today, said tighter policy was ahead as the Fed continued to fight inflation. This includes the prospect of rate hikes at back-to-back meetings, it said.
In June, the S&P 500 rose 4.7%, its best monthly performance since January. In the second quarter, the benchmark equity index gained 6.5%, on course for a third consecutive positive quarter.
On the macro front, the US economy was much stronger than expected in the second quarter, with the Commerce Department making a sharp upward revision. GDP grew at an annual rate of 2% in April-Juneabove the previous estimate of 1.3% and above the Dow Jones consensus forecast of 1.4%.
The labor market also remains robust; Investors know that too Initial jobless claims, which stood at 239,000 for the last weekbelow the 266,000 expected by the market.
The President of the Federal Reserve, Jerome Powell, has also intervened again. At an event in Madrid, he said the collapse of Silicon Valley Bank and two other mid-tier US banks earlier in the year demonstrated the “need to strengthen our oversight and regulation of institutions the size of SVB.”
Powell suggested that spring’s stress on the banking system “would have been much more difficult to manage had the largest banks been undercapitalized or illiquid.” He also pointed out that the Fed is “very reluctant to say” whether the banking crisis is over, adding that it is the job of central bank policymakers to “take care of things.”
On the other hand, he has warned that he does not expect a low-inflation environment anytime soon, which would complicate policymakers’ decisions. In his view, it could be “good timing” before the rate of increase returns to the Fed’s 2% target. “As for interest rates, you know, I think we have to find our way,” Powell told a question-and-answer session.
Yesterday, the largest US banks passed the Fed’s annual stress test. Stocks of companies like JPMorgan Chase, Wells Fargo or Bank of America, whose earnings season is just around the corner, are posting gains at the opening.
Micron Technology is also a protagonist, up 2% after the company reported earnings per share of $1.43 and, importantly, revenue of $3.75 billion, beating the market estimates of 3.67 surpasses billions of dollars.
The company is also forecasting earnings per share for the fourth quarter of between $1.12 and $1.26 per share, compared to a consensus of $1.06. Micron Technology is forecasting revenue of between 4.100 and 3.700 million for the fourth quarter of 2023, compared to an expected 3.890 million through the market.
Occidental Petroleum surged more than 1% after Berkshire Hathaway announced it would be buying more shares of the oil giant. Between June 26 and June 28, conglomerate Warren Buffett bought a total of 2.1 million shares, taking its stake to 25%, according to a regulatory filing.
In terms of analyst recommendations, this is good news for FREYR Battery. Its shares are up more than 10% after Morgan Stanley upgraded its recommendation to overweight. Analyst Adam Jonas believes the company has made “significant progress on business milestones.” Its $13 target price points to a 72% upside potential from Wednesday’s close.
Joby Aviation up 17% after South Korea’s SK Telecom announced a $100 million equity investment, expanding an existing partnership. On Wednesday, shares were already up 40% after the company announced it had received permission to begin flight testing of its first electric takeoff and landing vehicle (eVTOL).
In the bond markets, bond yields are rising following Powell’s recent statements. The 10-year yield is 3.758%, up four points, while the 2-year yield is up five points to 4.772%.
In commodities, oil prices are falling after US inventories data rose yesterday. US oil futures are virtually unchanged at $69.53 a barrel, while the Brent barrel is down 0.30% at $74.14.
The euro fell 0.38% against the dollar, giving each common currency an exchange rate of $1.0873.