(June 9): Wall Street staged a comeback as dip buyers emerged, lifting stocks amid renewed enthusiasm over artificial intelligence (AI) and bets that a solid economy will keep powering Corporate America.
The high-profile group of chipmakers such as Nvidia Corp and Micron Technology Inc paced gains in equities, climbing 5.6% after the biggest sell-off since 2020. Their rebound was enough for the S&P 500 to resume its advance from war-fuelled lows, though most of the gauge’s companies fell. The Nasdaq 100 rose 1.6%. Apple Inc investors gave a tepid reception to the next generation of its AI platform, with the shares dropping 1.9%.
Following a brief pause in the rally that drove stocks to a series of all-time highs, momentum-chasing traders returned, energizing bets the bull market is nowhere near its end. Also helping sentiment was the fact that oil pared its surge as Iran and Israel pledged to ease strikes that threatened peace talks.
The positioning-driven rout in equities at the end of last week was a “healthy reset,” according to Morgan Stanley’s Mike Wilson, who maintained his constructive outlook, supported by earnings and strong economic data.
“Markets rarely move in a straight line at the pace seen since the March lows,” he said. “A correction was inevitable and ultimately healthy if this bull market is going to extend into year-end, which remains our baseline with an 8,000 S&P 500 target.” The gauge closed slightly above 7,400.
His optimism was echoed by Citigroup Inc strategists led by Scott Chronert, who raised their year-end target for the S&P 500 to 8,100 from 7,700, after a “big step up” in earnings expectations.
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“We do not expect investors to lose confidence in the AI outlook,” said Mark Haefele at UBS Global Wealth Management. “Although tech stocks have come under pressure in recent days amid concerns about whether expectations can be met, business fundamentals remain strong.”
Haefele also noted that markets continue to overstate the “hawkishness” of top central banks. In his view, the risk of a Federal Reserve (Fed) rate hike remains low, and despite the increase in jobs, he bets policymakers are likely to be reassured by the slowing of wage growth.
After Friday’s blowout payrolls report, the focus shifted back to inflation. The May consumer price index (CPI) due on Wednesday is expected to jump by 4.2% from a year earlier — the highest rate in more than three years. But the core CPI is seen cooling slightly on a monthly basis — potentially providing a welcome signal to Fed officials.
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The question is whether the market resilience can hold as investors digest inflation data and a wave of high-profile IPOs and equity offerings, according to Mark Hackett at Nationwide. They could provide an important test of whether traders are rotating capital into new opportunities or becoming more cautious on risk assets, he added.
Uploaded by Isabelle Francis
