To The Moon

If investors wanted to take some money off the table after a big first half rally for stocks, there’s little evidence of it in ETF flows. 

⚠️ Trading tips: Looking at calls above 370.5 and puts below 368.9 on Monday. A short trading weekwith celebration to pump the market.

Bullish for the market

Several of the biggest broad-market equity funds saw big inflows over the past week, according to FactSet. That includes the Vanguard S&P 500 ETF (VOO) and the Invesco QQQ Trust (QQQ), which investors have actually been avoiding for most of the year despite the rally for tech stocks.

Stocks rose Friday and technology names continued their staggering run to cap off a strong start to the year, and the best first half for the Nasdaq Composite since 1983.

The Dow Jones Industrial Average gained 285.18 points, or 0.84%, to close at 34,407.60. The S&P 500 climbed 1.23% to end at 4,450.38, and the Nasdaq Composite advanced 1.45% to settle at 13,787.92.

The frontliners of the stock market

Mega-cap technology stocks responsible for a sizeable chunk of 2023′s market gains rose Friday. Dominant artificial intelligence chipmaker Nvidia jumped 3.6%, bringing its yearly gains to more than 189%. Netflix added about 2.9%, while Meta Platforms, Microsoft and Amazon rose 1.9%, 1.6% and 1.9%, respectively. Apple gained 2.3% to close above a $3 trillion market cap.

Friday marked a pivotal day for investors, bringing the conclusion of the month, second quarter and first half. The last six months saw 2022′s beaten-down growth names make a broad comeback as the promise of artificial intelligence and hope of an end to the Federal Reserve’s rate campaign lifted major tech players to astonishing heights.

Many investors are warning against becoming too greedy after a 13% jump in global equities in the first half of the year. Some of the world’s top money managers argue that chasing the rally from here is risky as it’s only a matter of time until elevated interest rates crimp company profits. On the flip side, July tends to be positive for shares, if history is any guide.

You've been warned 😅

Despite these strong gains, some on Wall Street expect volatility in the second half and likely profit taking from investors that benefited from the rally. This, coupled with changing technicals, could lead to sideways action, or a slight pullback in the S&P, said Anna Han, equity strategist at Wells Fargo Securities.

“The technicals are telling us that this ubercap-led rally has just been overextended,” she said. “It’s been hitting those overbought levels, and we believe it’s time for that trade to kind of take a pause.”

This is where the major averages stand:

* For June: The S&P 500 gained 6.5% for its best monthly performance since October. The Nasdaq advanced 6.6%. Both indexes notched a fourth consecutive positive month. The Dow climbed 4.6%, for its best month since November.

* For the second quarter: The S&P 500 rose 8.3% for a third straight quarter of gains and its biggest quarterly advance since the fourth quarter of 2021. The Nasdaq jumped 12.8% for back-to-back positive quarters. The Dow added 3.4% for a third winning quarter.

* For year to date and the first half: The S&P 500 popped 15.9% for its best first half since 2019. The Nasdaq surged 31.7%, for its best first half since 1983. The 30-stock Dow added a modest gain of 3.8%.

The three major averages also notched winning weeks, gaining more than 2% each.

Watch out for the Fed

Wall Street also got another hint of encouraging inflation news as the core personal consumption expenditures price index, a closely watched gauge by the Federal Reserve, rose less than expected in May.

“This is excellent news on the inflation fight,” said Jamie Cox, managing partner for Harris Financial Group. “If you don’t believe disinflation is happening, you aren’t paying attention. The Fed was right to pause and needs to hold firm at these levels to prevent overcorrecting and causing an unnecessary recession to fight a beast that is now under control.”

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