(July 6): US stocks climbed on Monday as investors jumped on technology shares after the artificial intelligence (AI) trade notched one of its sharpest pullbacks in more than two years.
The Nasdaq 100 gained 1.1% as of 9.44am in New York, while the S&P 500 rose 0.4%, led by advances in semiconductor and other AI-linked shares ahead of a potentially pivotal week for the sector.
Traders are gauging whether a nascent shift from chip stocks into overlooked areas of the market will continue this week. Morgan Stanley strategist Michael Wilson says leadership is broadening as investors trim semiconductor holdings and redeploy capital into areas that have lagged this year’s rally. This cohort, which includes the likes of Microsoft Corp, Amazon.com Inc and Meta Platforms Inc, is attractive within the AI ecosystem due to their strong core businesses, he noted.
Samsung Electronics Co reports preliminary quarterly earnings on Tuesday, offering one of the first major updates on AI-related memory demand.
In the IPO space, SK Hynix Inc kicked off its formal marketing process for its US listing on Monday, as the South Korean chipmaker looks to capitalise on surging investor demand for the high-flying memory-chip sector.
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SpaceX’s addition to the Nasdaq 100 on Tuesday is also expected to spur index-related portfolio rebalancing.
The debate over market leadership comes as positioning data point to a reduction in exposure to technology. Hedge funds were net sellers of global equities for a third straight week through Thursday, according to Goldman Sachs Group Inc. Information technology ranked among the sectors facing the heaviest selling, extending a retreat that began after funds unwound tech positions at the fastest pace in a decade. Single stocks continued to be sold while macro products attracted fresh buying.
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The US stock market was on track for solid gains heading into the holiday weekend before a selloff in technology stocks on Thursday partly spoiled the risk-on mood.
“Despite the selloff, momentum continues to be extremely crowded,” Goldman Sachs traders wrote in a note to clients last week, adding that more unwinding could occur. At the same time, they flag that lower liquidity and some summer fatigue might have exacerbated the pullback, and that they see some “nascent signs of dip buying,” which has paid off earlier this year.
Attention also turns to monetary policy. Minutes from the Federal Reserve’s June meeting, due on Wednesday, may offer greater insight into officials’ inflation concerns after governor Kevin Warsh shortened the post-meeting statement and chose not to submit interest-rate projections.
In single stock movers, Broadcom Inc shares rose on Monday after the company said it will provide custom chips for Apple Inc in an expanded deal that runs through 2031. Strategy Inc shares fell after the Bitcoin treasury company announced that it sold US$216 million in Bitcoin between June 29 and July 5.
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