In the latest Daily Market Notes report for investors, analysts at Navellier & Associates said strong earnings reports from Microsoft (NASDAQ and Alphabet (NASDAQ ) have revitalized the outlook for the ai sector and the current earnings season.
“stocks are having their best week of the year, recovering from the first major pullback since the strong rally that began in late October. Once again, big tech is leading the way, with the Magnificent 7 up 3.3% this morning and 4.4% for the week,” the analysts noted.
Despite cautious comments from Taiwan Semiconductor (TSM) weighing on Nvidia (NVDA) stock earlier, assurances from major tech companies about significant investments in ai infrastructure led to NVDA's rally to $873.
The return of optimism was helped by a strong release from Alphabet, which not only beat earnings expectations but also announced a major share buyback and new dividend, taking its stock to all-time highs with a 10% rise today.
“It was very important that Big tech's earnings were strong, as they not only have a significant weight in the indices, but have an even larger share of overall earnings,” the analysts said.
However, not all technology companies did well, they continued.
Intel (NASDAQ reported disappointing top-line results and lower-than-expected margins, without significant exposure to ai. Its shares fell 11.2%.
In the broader market, fears of high personal consumption expenditure (PCE) inflation eased as both headline and core PCE for March fell in line with forecasts, providing relief to the bond market.
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Meanwhile, 10-year U.S. Treasuries and bonds saw slight declines in yields, reflecting a market adjustment to a prolonged trajectory of reducing inflation.
On the consumer front, the latest University of Michigan survey indicated stable inflation expectations but a slight drop in consumer confidence, holding near a three-year high.
Sector-specific performance varied, with Exxon (CVX) and Chevron (NYSE:) (NYSE:) sees declines after missing earnings expectations, contrasting with energy stocks' minimal impact on broader indexes.
“Overall, this week's strong rally supports the buy-the-dip mentality, and the important ai theme remains ongoing, all with continued uncertainty over when the Fed will cut rates,” the analysts said.
“With employment strong and consumers still spending (personal spending in April was +0.8%, above the 0.6% forecast), market momentum has returned to the upside,” they added.
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