MarketSurge powers the charts in this video.
Energy stocks have been the strongest sector year-to-date, and now we know why. The escalation in the Middle East is not a surprise, and the market has been anticipating it for some time. Crude oil and gold are having a sizable upside gap, US stocks are slightly lower, and Japanese and European stocks are the most affected. Historically, the US market rallies after the beginning of new wars, especially if the market realizes that the war is not likely to last long. If the oil infrastructure in the Middle East is not impacted, oil prices will also likely stabilize.
In the meantime, another Mag7 stock crushed estimates and sold off. The grand-daddy of AI, NVDA, is basically flat since last August despite record-breaking quarters and constant guidance increases. Institutions are selling. There’s distribution in tech. QQQ is still stuck in a range between 640 and 580. I wouldn’t be surprised if the lower end of the range is tested first in the next few weeks.
Financials remain weak and are bear-flagging below their 200-day moving average. The defensive, consumer staples, utilities, and healthcare are leading the market. The only tech exceptions have been fiber optic, memory chip, and HVAC stocks, which are some of the main AI infrastructure plays.
In other news, XYZ (the former Square) is planning to cut half of its workforce due to AI efficiencies – 4,000 people. Its CEO said that many other companies are likely do the same. This is a trend to watch. It is a slippery slope. Yes, your margins will improve initially, and your stock might bounce, but if every company does it, then the weaker consumer will impact everyone’s bottom line eventually, and the market might get spooked. The Fed can’t solve that by lowering interest rates.
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