To The Moon

U.S. stocks rose in midday trading on Wednesday, led by technology stocks. The Nasdaq and the US Federal Reserve rose sharply. Investors are analyzing the latest financial reports of Microsoft and AMD and preparing for the Federal Reserve's monetary policy decision. The number of private employment in the United States increased by 122,000 in July, lower than market expectations.

The Dow Jones Industrial Average rose 255.14 points, or 0.63%, to 40,998.47 points; the Nasdaq rose 436.94 points, or 2.55%, to 17,584.35 points; and the S&P 500 rose 90.42 points, or 1.66%, to 5,526.86 points.

Today is the last trading day of July. Wall Street will also end a turbulent trading month. So far this month, the Dow and the Russell 2000 small-cap index have risen by more than 4% and 9%, the Nasdaq fell 3.3%, and the S&P fell 0.4%.

The divergence between large-cap and small-cap stocks, and between technology and cyclical stocks, highlights the role of market rotation in driving smaller and more cyclical stocks.

The market continues to focus on U.S. stock earnings. Boeing announced a change in its CEO candidate, appointing former Rockwell Collins CEO Kelly Ortberg to replace David Calhoun as the company's new president and CEO. Ortberg will take office on August 8.

Boeing also reported a wider-than-expected loss in the second quarter and disappointing revenue.

U.S. health insurance giant Humana's stock price fell after issuing weak guidance.

Used car trading platform Carvana and chip maker Qualcomm are among the companies that will report earnings after the close on Wednesday.

Investors are also evaluating the different results of Microsoft and chipmaker AMD, which shows that there are disagreements in the field of AI. Microsoft's disappointing earnings report led to a drop in its stock price, as well as a drop in the stock prices of other technology companies, while AMD's strong earnings report drove a rebound in chip stocks.

AMD's stock price soared, and the company's second-quarter results exceeded market expectations. AI darling Nvidia followed suit after AMD reported earnings, having previously named it a top pick.

Microsoft shares fell as its cloud business disappointed Wall Street.

Fares Hendi, portfolio manager at SG Prevoir in Paris, said: "I am very happy with the gains in AI stocks, which proves that it is not a bubble. The sell-off was not due to earnings but valuations. Some investors were worried about a bubble, but this is not the case. The AI ​​cycle is still continuing."

Dambisa Moyo, head of Versaca Investments, expressed growing concerns about the current overvaluation of the stock market.

She pointed out that Wall Street's enthusiasm for AI this year has greatly boosted the earnings of large technology stocks and driven the three major stock indexes to new highs, but what is more worrying is that the United States may be experiencing a particularly severe bubble driven by high debt and so-called "unproductive" assets.

Moyo emphasized that these unproductive assets are much more harmful than those productive assets that are financed by cash or equity and have real contributions to the economy, because the losses they cause are more far-reaching for investors.

Federal Reserve Monetary Policy Meeting

The Federal Reserve will end its two-day policy meeting on Wednesday afternoon, Eastern Time, and announce the meeting's decisions and statements. Federal Reserve Chairman Powell will hold a press conference afterwards.

The market generally expects the Fed to keep interest rates stable at this meeting, but the focus will be on Powell, focusing on whether he will make any remarks and hints that a rate cut may be imminent.

"Investors expect the Fed to send a strong signal of a September rate cut," said Bryce Doty, senior portfolio manager at Sit Investment Associates. "But it's hard for the Fed to be too confident about future rate cuts because it raises the question, 'Why not cut rates now?' Therefore, investors may be disappointed with the tone and posture of the Fed meeting."

Subadra Rajappa, head of U.S. interest rate strategy at Societe Generale, said: "I think they will change the wording in the statement to suggest that there will be a rate cut at the September meeting."

On Wednesday, the U.S. private employment agency ADP Research Institute reported that the number of private jobs in the United States increased by 122,000 in July. The median estimate of economists surveyed was an increase of 150,000.

The ADP data showed that U.S. companies added the fewest employees since January, consistent with signs of weak labor demand.

The ADP agency also said that wage gains for job-hopping employees slowed to the lowest level since 2021 in July, as did wage gains for employees who stayed. The ADP data is consistent with signs of a gradual slowdown in hiring. Unemployment claims have been climbing in recent months, and the number of Americans applying for unemployment benefits has also risen.

Separate data showed that the U.S. index of existing home contracts rose for the first time in three months in June, as buyers sought to move or upgrade their homes despite high prices and high borrowing costs.

The National Association of Realtors (NAR) said on Wednesday that its index of existing home contracts rose 4.8% to 74.3 in June, reflecting increases in all four major regions. The increase was far above the highest expectations of economists surveyed by Bloomberg.

The index is recovering from a record low since 2001 as the housing market tries to escape a protracted downturn. Mortgage rates have fallen recently, encouraging more homeowners to list their properties for sale, which should ultimately drive more sales activity.

"Increased housing inventory is starting to lead to an uptick in contract signings," and more supply should hit the market in the coming months, NAR chief economist Lawrence Yun said in a statement. "Multiple bids are less intense and buyers are in a better position."

This should help improve housing affordability, with the NAR index showing it is now near its lowest level in about 40 years. Data released on Tuesday showed that the S&P CoreLogic Case-Shiller National Home Price Index rose 5.9% year-on-year in May, hitting a new high.

Focus stocks

Morgan Stanley analyst Joseph Moore and his team released a research report on Wednesday, saying they are optimistic about Nvidia's long-term growth potential and that market concerns about it will ease over time. Morgan Stanley re-rated Nvidia stock as a "preferred stock" while maintaining an "overweight" rating.

The analyst believes that this round of selling may be a very good buying opportunity, setting a target price of $144.00 for Nvidia, 38.8% higher than Tuesday's closing price.

In this round of technology correction in U.S. stocks, Nvidia's stock price has fallen by more than 16% in the past month. Despite this, the computing giant has received strong support from Wall Street giant Morgan Stanley.

The National Highway Traffic Safety Administration (NHTSA) said on Tuesday that it would recall more than 1.8 million electric vehicles in the United States because the software could not detect an unlocked hood. The agency believes that this software defect may cause the unlocked hood to open suddenly while driving and block the driver's view, thereby increasing the risk of a crash.

The recall involves Model 3, Model S, Model X produced from 2021 to 2024, and Model Y models produced from 2020 to 2024, affecting nearly 1.85 million vehicles.

It is reported that Tesla has released a car remote upgrade software update to solve this problem, and affected car owners will receive a notification letter from Tesla before September 22, 2024.

AMD released its financial report after the market closed on Tuesday, expecting data center GPU sales of $4.5 billion in 2024, previously expected to be $4 billion; Microsoft's use of MI300 chips has increased; MI300 chips generated more than $1 billion in revenue in the second quarter. The outlook shows that AI chips are helping boost growth.

AMD expects third-quarter revenue to reach $6.7 billion, plus or minus $300 million, with the median representing a 16% year-on-year increase; data center GPU sales are expected to reach $4.5 billion in 2024, higher than the previous expectation of $4 billion.

AMD CEO Lisa Su said: "We achieved strong revenue and profit growth in the second quarter, mainly due to record revenue in the data center business. Our AI business continues to accelerate, and we are expected to achieve strong revenue growth in the second half of the year as demand for Instinct, EPYC and Ryzen processors drives us."

Bank of America lowered AMD's target price from $195 to $180.

Apple CEO Cook announced on social platform X on Wednesday that "Apple Intelligence" will open up a world of new possibilities for users, and it is exciting to see our developers start using it for development. It is understood that on Monday, Apple released developer beta versions of iOS 18.1, iPadOS 18.1 and macOS Sequoia 15.1, allowing users to experience some of the features of "Apple Intelligence", which is currently only available to Apple developers.

Microsoft's fourth-quarter revenue was $64.727 billion, up 15% year-on-year, and 16% year-on-year excluding the impact of exchange rate changes; net profit was $22.036 billion, up 10% year-on-year, and 11% year-on-year excluding the impact of exchange rate changes; diluted earnings per share were $2.95, up 10% year-on-year, and 11% year-on-year excluding the impact of exchange rate changes.

Microsoft's fourth-quarter revenue and diluted earnings per share both exceeded Wall Street analysts' previous expectations, but the outlook for Azure's revenue growth rate in the first quarter of fiscal 2025 failed to meet expectations.

Apple uses the Tensor Processing Unit (TPU) developed by Google instead of Nvidia's widely used graphics processing unit (GPU) to build two key components of Apple Intelligence.

Amazon will announce its second-quarter results. UBS issued a research report on Wednesday, saying that the market focus in the past few years has been mainly on the company's profit margin expansion.

Looking ahead, UBS predicts that Amazon will adopt a more aggressive investment strategy, believes that capital expenditures on AWS will increase, and will increase investment in the expansion of its grocery business and the deployment of satellite networking service Project Kuiper.

UBS expects management to reveal more details of capital expenditures, which can predict AWS's future revenue growth potential. UBS maintains a "buy" rating on Amazon, with a target price raised from $217 to $224, and pushes the valuation parameters forward to the third quarter of 2025 to the second quarter of 2026, and raises the earnings per share forecast for 2024 to 2026 by 4%, 5% and 5%.

Meta Platforms, the parent company of Facebook and Instagram, has agreed to pay $1.4 billion to the state of Texas to resolve an important lawsuit in which the Texas government accused the tech giant of illegally using facial recognition technology to collect biometric data of millions of Texans without formal consent.

According to media reports, according to the latest statement by Texas lawyers, the settlement terms disclosed on Tuesday local time marked the largest agreement ever by any single state government. Texas' legal team includes the plaintiff company Keller Mailman.