Don't Buy AI & Semicon Stocks on 05 July. Pause?
As America celebrates Independence Day on 4th July, overall mood must be one of euphoria.
This is because the US market closed “higher” on Mon, 03 Jul 2023 even if it was merely a 4 hours trading session.
Incidentally, this was my prediction in my post dated 03 Jul - US Short Trading Week, Will Tesla Rally On?
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When US market closed at 1:00pm:
DJIA: +0.03% (+10.87 to 34,418.47).
S&P 500: +0.12% (+5.12 to 4,455.59).
Nasdaq: +0.21% (+28.85 to 13,816.77).
On a separate note, before diving into the topic’s subject, I wonder whether am I, the only writer that (at times) dissuade readers not to invest? (it’s also a strategy, right).
Leave a comment, let me know ok. Thanks!
I asked because I am doing it again.
While America continues with celebration, there is a quiet storm “brewing” at the horizon.
Up until now, there is no clarity whether it was China who fired the first salvo (see above) in response to US recent ban on semiconductor chips export to China.
What is certain:
China is the world’s largest producer of gallium and germanium.
These metals are used in semiconductors production.
Rationale for doing so is “to “safeguard national security and interests” - a term oft heard in the past when US decides to put a “circuit breaker” in China’s path.
What this means when implemented on 01 Aug 2023 is Chinese exporters will need to seek special approval from State Council, China's cabinet, for the listed items.
[Sidetrack Comments]
I wonder (now) if the ruling party is kicking themselves for endless persecution of their homegrown IT companies (eg. Tencent, Alibaba, Baidu) etc… about 2 years back.
Had they allowed the home grown “giants” free rein to quickly grow instead of stifling & halting their progression, at least China might have an equal “fighting” opportunity against the waves of restrictions they are facing headon now.
Hindsight is a b**ch, right?
On the same day, the Biden administration also looks set to restrict China further in a tit-for-tat manoeuvre (see above).
What this means:
US is preparing to restrict Chinese companies' access to U.S. cloud-computing services.
When implemented, the rule requires US cloud-service providers to seek US government’s permission before cloud-computing services (using advanced artificial-intelligence (AI) chips) could be provided to Chinese customers.
This policy will have a “direct” impact on (a) $Amazon.com(AMZN)$ and (b) $Microsoft(MSFT)$ - the world’s #1 and #2 cloud computing providers.
In my Mon, 03 Jul post, I believed US market performance would largely be “influenced” by official data released, throughout the week.
The ISM Manufacturing Purchasing Manager Index (PMI) data was the first to be released on Mon, 03 Jul 2023, (see above):
July reading came in at “46”.
This is lower than market expectations of “47”.
July’s data is also lower than last month's “46.9”.
Additional Notes:
ISM Manufacturing PMI is an indicator of the economic health of the manufacturing sector.
Reading above 50 indicates expansion in manufacturing.
Reading below 50 indicates contraction.
With 03 July data lower than (a) the standard “50”, (b) forecast and (c) last month’s data, it could indicate that the US manufacturing sector is in contraction.
This is not good news for the US economy & US stock market heading further into H2 2023.
What I Would Do Tomorrow When Trading Resumes:
Watch and see how the tit-for-tat between US and China plays out. It could escalate out-of-control, you never know.
Continue to watch out for other official data to be released. Refer to my Monday post for the list of official data due out this week.
I would monitor both IT giants (Amazon & Microsoft) closely.
I would also hawk over semiconductor stocks like $NVIDIA Corp(NVDA)$ and $Advanced Micro Devices(AMD)$ as well. They maybe implicated in the process.
Do you think I am the only one who will discourage reader from investing? Leave a comment, let me know ok.
Do you think the US market will rise or decline tomorrow when trading resumes?
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Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
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It seems that China and the United States must cooperate, otherwise the loss of the US chip industry will be super huge!
Buy at the bottom and get a second bottom as a gift )
Along with apple, msft, meta, and the list goes on
AMZN loss in sales due to consumer not only spending all the left over covid money, their also in massive debt.
Microsoft has almost lost $10 today.. apple has lost almost $4… Amazon has lost $3… what are you saying about trillion dollar market caps not losing what..? It’s fine.. Bear and Bulls both must eat.
Prime days 11-12 should generate billions of revenues..
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AMZN's stock price on July 10, 2020, the final day of an 18-month growth spurt before starting a long sideways trend, was $160.
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AI stocks have take the advantage for a while
Switching to JD which is one of the best E commercial companies in the world with good dividend.
Doesn’t Amazon usually report on the amount of products being bought during Prime Day event.