What a difference a week makes in Wall Street
Wall Street looked like it was going to be running into a bit of trouble at the start of earnings season, with Alphabet (Google) setting the tone. A first ever quarter with negative free cash flow amid increased AI capital expenditure did not sit right with investors as worries continued to grow about how hyperscalers were going to keep delivering.
That continued through to last Wednesday with the S&P 500 falling by 1.5% to post its lowest daily close in seven weeks. That is all before Microsoft came to the rescue and with better US-Iran developments this week, things have taken a complete turn.
The push higher on Monday was a cautious ascend, holding near 7,600 and the previous record highs in early June. And that was followed by a surge of buying yesterday with a technical breakout now providing the momentum for further gains.
[S&P 500 index daily chart]
So, what can we really conclude from the latest breakout here?
Well, the AI trade is not as fragile as one would think. At some point in the past two weeks, there was an increasing belief that investors are shifting towards the phase of demanding firms to show me the money now amid growing concerns about the massive capital expenditure layout on AI.
That has been a key talking point since the turn of the year. But at each stage that we get to that debate, it all gets brushed aside and the can gets kicked down the road once again. It has been about eight to ten months now and the market isn't turning the other cheek yet. And that says a lot.
With the S&P 500 stalling in June and July, this earnings season was going to be a pivotal test. It was a make or break moment. And I guess we have found our answer to that following the break higher yesterday.
Leopold Aschenbrenner's AI fund blowing up was a cautionary signal at first but as it turns out, markets are using that as a bottom signal after the better momentum from big tech earnings after. It was a fine balance but at the end of the day, dip buyers got their just rewards in braving the risk there.
So, what's next this week?
AMD earnings were strong yesterday and that is piling on the momentum for semiconductors and chipmakers again. Shares are down in overnight trade but that mostly owes to the surge higher just before the earnings release in pricing in better expectations and also the fact that SpaceX said that they will commit to Nvidia chips and no longer buy AMD chips moving forward.
AMD shares may be down some 9% in overnight trade but Nvidia shares are up 2.5%, with the broader market mood also looking rahter positive on the technical break above.
Coming up later today, Sandisk and Western Digital will be the two other big names to watch for after the close.
This article was written by Justin Low at investinglive.com.提供 MainLink：Investinglive RSS Breaking News Feed
FX初心者には必須 無料のうちにGET！
