Set aside concerns about the debt
ceiling tech enthusiasts are bustling with buying
energy.
The Nasdaq Composite wrapped up its fifth consecutive week of gains
this Friday, rocketing 2.5% over the past five days. The tech-centric index is now up 24%
year-to-date, significantly outstripping its U.S. counterparts. In
comparison, the
S&P 500 boasts a
9.5% gain for the year, while the
Dow Jones Industrial Average shows a slight decline.
The primary fuel behind this
weekU+02019s rally has been the enthusiasm around chipmaker
NvidiaU+02019s (NASDAQ:
NVDA) stellar earnings
report and its dominant role in artificial intelligence technology.
However, the buying spree also covered shares of
Microsoft (NASDAQ:
MSFT),
Meta (NASDAQ:
META), and
Alphabet (NASDAQ: GOOGL), all with unique AI narratives to
share.
Buoyed by the optimism that a
deal is within reach to increase the debt ceiling and with signs
that the Federal Reserve might be easing up on the rate of interest
rate hikes, the stock marketU+02019s sentiment this year seems to
be reverting back to the tech-centric aura that characterized the
past decade.
“Pinning your investments on
these mega-cap tech stocks has proven to be a smart move in the
current market,” noted Victoria Greene, Chief Investment Officer of
G Squared Private Wealth, during an interview on CNBC’s “Worldwide
Exchange” on Friday morning. “The potential in AI is undeniable, as
is the impressive earnings performance of these
companies.”
AI stocks are on an absolute tear
Investors are gravitating towards
AI, fueled by the increasing demonstrations of its practical
applications—a technology that had been highly anticipated for a
while. OpenAI has experienced a growth spurt since the launch of
the chatbot ChatGPT last year, and Microsoft, its leading investor,
is incorporating the core technology into as many products as
possible.
At the same time, Google is
taking every chance to advertise its competitive AI model. Meta CEO
Mark Zuckerberg is also more inclined to update shareholders about
the company’s AI progress than discuss the company’s
financially-draining endeavors in the metaverse.
Nvidia, renowned for its graphics
processing units (GPUs) that energize advanced video games, is
surfing the AI tide. NvidiaU+02019s stock experienced a 25% surge
this week, reaching a record high and raising the companyU+02019s
market cap close to $1 trillion, following first-quarter earnings
that exceeded expectations.
Will the tech stock rally
continue in the last week of May?
Upcoming Labor Market Reports
Starting Wednesday, new data on
the U.S. employment landscape will be disclosed, with the Bureau of
Labor Statistics (BLS) presenting the latest Job Openings and Labor
Turnover Survey (JOLTS) for April. This report will provide
insights into job openings, hiring activities, resignations, and
job separations.
Job openings are predicted to
have decreased to 9.2 million from 9.6 million in March,
potentially reaching a two-year low. In addition, the ratio of job
openings to unemployed workers was 1.6 in March, lower than the 2
to 1 peak in December but higher than pre-pandemic levels,
suggesting a strained labor market.
Payroll service provider ADP will
also publish its National Employment Report for May, providing an
overview of the private sectorU+02019s employment situation. It is
expected that private companies added about 200,000 jobs in May,
down from 296,000 in April. This sets the scene for the Labor
DepartmentU+02019s nonfarm payrolls report for May, to be released
on Friday.
Economists predict an addition of
180,000 jobs, a drop from AprilU+02019s 253,000, as the Federal
ReserveU+02019s interest rate hikes temper the job market. As a
result, the unemployment rate is projected to rise slightly to
3.5%, from 3.4% in April, a match for the lowest level in 53 years,
reached in January.
Updates on Housing Prices
On Tuesday, S&P Global, an
index provider, will unveil its Case-Shiller National Home Price
Index for March, while the Federal Housing Finance Agency will
present its House Price Index (HPI) detailing single-family home
prices.
According to the Case-Shiller
Index, home prices are anticipated to have only risen by 0.1% in
March, after a 0.2% gain in February, marking the first price
increase following seven consecutive months of decline starting in
July last year. On an annual basis, prices will likely drop by
0.7%, which could be the first year-over-year decline in 11
years.
Eurozone Inflation Rates
The annual inflation rate in the
eurozone is expected to have eased to 6.3% in May, down from 7% in
April, potentially the lowest rate since February of the previous
year. Although inflation in the currency bloc has retreated from
the record high of 10.6% in October, it continues to significantly
exceed the European Central BankU+02019s (ECB) target of
2%.
Core inflation, which excludes
fluctuating costs of food and energy, is likely to have moderated
to 5.5% in May, a slight decrease from 5.6% in April and down from
the record high of 5.7% in March, based on data dating back to
1991.
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