Economy

Can the stock market move higher?

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It was a peaceful trading day, unlike our expectation of some pullback as major indices trend higher once more.

Indeed, Nasdaq increased by 0.9% to close at its highest in 2023. S&P 500 shared a similar movement and rallied 0.4%.

What fueled the rally?

A brightening economic outlook has increased the odds of a soft landing. This had pushed yields to move lower for the past trading days, given investors’ expectation that the Fed’s rate hike campaign will end as inflation cools.

Indeed, a lower yield is a booster for tech stocks. They had made profits many years down the road more rewarding as their engines soared.

Retail sales on highlight

Today, we will receive the retail sales data. This will shed light on the strength of consumers’ spending since most data points to the robust financial health of Americans.

If the market viewed the result as one that could lead to persistent economic demand, it is safe to expect yield to shift upward, putting pressure on stocks.

Earnings seasons confirmation

Traders remain on the melody of dance for equities. While preliminary earnings thus far have been good, it accounts only for around 5% of S&P companies reported.

Moreover, this quarter is actually expected to be a low end of the earnings cycle, which could see major comapnies falling by a high end of a single digit on an annual comparison basis.

There is an expectation of a rebound, and thus any modest upward revision could be a boost as companies geared toward a beat on the final league.

Artificial trends cannot be ignored.

Investors will also now pay closer attention to the artificial movement, which has increased shares. Among them are Nvidia, the major chipmaker seen as a poster child of the next wave of innovation.

We want to see that comapnies showcasing the possibility of improvement in margin through AI in the next few quarters again, which could drive markets to yet another risk-on cycle.

It is 18 July 2023, 8.50 am in Singapore and 8.50 pm in New York. Given the market’s large movement, we hope you have a good trading day, and we shall catch you again in our trading channel.