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Trendsters, are you ready for a market reality check? Today, we're asking the tough question: Is the AI Party Over? Time to Cash Out?
The tech giants stumbled yesterday, and the AI hype train seems to be slowing down. But don't worry, we're here to guide you through the twists and turns of the market.
In this issue, we'll examine whether the AI boom is truly losing steam or simply taking a breather. We'll also take a closer look at Morgan Stanley's recent pullback in our Chart of the Day, dissect the latest Market Moving News, and sprinkle in some Market Mischief to lighten the mood.
So, get ready for a whirlwind tour of the market's twists and turns. We'll arm you with the insights you need to make smart decisions, no matter what the AI future holds. |
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A few weeks ago, a hidden gem in the therapeutics world saw their stock soar from $1.03 to $1.68.
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That is a 63% gain, in just a matter of a few days. Since then the stock has shot up as high as $3.12 and has been given a buy rating given Buy Rating at HC Wainwright.
According to MarketBeat, they currently have a $9.00 price target on the stock But the questions are why? And what’s next?
The stock was on a rocket ship because of breaking, FDA related news about a breakthrough that has the potential to transform a specific heart disease treatment as we know it
Learn More Today: Tap here to download the special report today and learn more By tapping the link above you are agreeing to the privacy policy and to receive this special report and updates from PharmaStocksToday.com |
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Magnificent Seven Loses Luster, Market Rotation Takes Hold |
Wednesday's trading session was a stark reminder that even the mightiest can stumble. Disappointing earnings from tech behemoths Alphabet and Tesla triggered a significant market downturn, with the Nasdaq Composite experiencing its worst day since October 2022.
The so-called "Magnificent Seven" stocks, which have propelled the market for much of the past year, all felt the heat. This suggests a potential shift in investor sentiment, as the allure of artificial intelligence (AI) seems to be waning in favor of smaller-cap stocks that could benefit from an anticipated rate cut.
While the Russell 2000 held up slightly better, the Dow Jones Industrial Average suffered the least damage, buoyed by strong performances from pharmaceutical giants Johnson & Johnson and Merck.
This may signal a changing of the guard, with mega-caps losing their momentum advantage and investors seeking opportunities in previously overlooked sectors. However, it's important to remember that these large companies are not easily dismissed, and their potential for recovery should not be underestimated.
Beyond the tech giants, other notable earnings reports included misses from General Dynamics and Visa, while AT&T and Seagate Technology defied the downward trend with better-than-expected results. On the economic front, new single-family home sales reached a seven-month low in June, further highlighting the challenges faced by the real estate sector due to high mortgage rates and prices.
Market Snapshot: S&P 500: -2.3% to 5,427.13 Dow Jones Industrial Average: -1.3% to 39,853.87
Nasdaq Composite: -3.6% to 17,342.41 10-year Treasury note yield: +4 basis points to 4.291% Cboe Volatility Index: +23% to 18.13 |
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AI's Earnings Report Card |
What do you call an AI that just got its earnings report back? A bit less magnificent than it thought. This week's tech stock tumble, triggered by less-than-stellar earnings from AI darlings Alphabet and Tesla, is a gentle reminder that even the most sophisticated algorithms haven't mastered the art of predicting their own financial performance. It seems Wall Street's expectations for these tech titans were a bit too lofty, and the reality check sent investors scrambling for the exits. But hey, even the smartest students have off days, right? Perhaps this is just a minor setback on the road to AI domination. After all, every stumble is a learning opportunity, even for a machine. And who knows, maybe next quarter's report card will be filled with straight A's. |
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Morgan Stanley: A Bullish Bounce or Temporary Reprieve? |
Morgan Stanley's stock chart is giving us a bit of a mixed bag. After a dazzling ascent to a multi-year high, it's now taken a breather. The question is, is this a temporary pit stop before the next leg up, or a sign of more significant weakness? Here's what we're seeing: -
Resistance-Turned-Support: The $100.99 level, once a seemingly impenetrable ceiling, is now acting like a trampoline, potentially providing support.
- EMA Lifeline: The stock is still clinging to its upward-sloping 21-day EMA, a positive sign for those with a bullish bias.
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Inside Week Possibilities: The current week's low is holding above last week's, suggesting the possibility of an "inside week" formation, which some traders interpret as a continuation pattern.
The Bottom Line:
Morgan Stanley's chart is a bit like a high-wire act right now. Will it regain its footing and continue its upward climb, or will it stumble and fall? The next few days will be crucial in determining the answer.
Keep a close eye on the $100.99 support level and the 21-day EMA. If the stock can hold above these levels, it could be a sign that the bulls are still in control. However, a break below could signal a deeper pullback. |
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Reality Check: The AI Hype Train Hits a Wall |
The S&P 500 and Nasdaq 100 (QQQ) faced their worst losses since December 2022 on Wednesday, driven by underwhelming earnings reports from Alphabet (GOOGL) and Tesla (TSLA). The issue wasn't just the softer-than-expected results, but the high expectations set by investors.
The entire Artificial Intelligence theme, once heralded as a transformational shift, is now under reevaluation. Outside of semiconductors, few companies are making significant profits from AI. Google still faces massive capital expenditures before it can see substantial returns, and while Tesla’s future possibilities are intriguing, its immediate margins are soft and project results are delayed. Apple (AAPL) provides a clear example of the AI hype outpacing reality. Despite positive analyst comments and raised price targets due to AI plans, Apple’s EPS estimate for fiscal year 2025 has only marginally increased from $7.23 to $7.32, indicating just 10% growth year-over-year. The stock remains expensive, with AI yet to make a notable impact on the bottom line. The market seems more enamored with the AI narrative and price action than the actual financials, reminiscent of the internet bubble when varied valuation metrics justified high valuations. Mike Wilson of Morgan Stanley noted, "AI is sucking all of the oxygen out of the room. I see AI everywhere, except in the numbers. ... It hasn't really driven revenues and earnings anywhere."
The pressing question is how deep this AI correction will go. While no one can predict this precisely, mega-cap stocks will likely retain some degree of institutional support. Wednesday’s intense selling pressure eventually affected small-caps, which had held up well earlier in the day. The broader market doesn’t look as grim as the Magnificent Seven, but the severity of the selloff raises concerns about buyer confidence. As more earnings reports roll in, the significant shift in the AI thesis remains the key takeaway. Investors will need to adjust their strategies accordingly, recognizing that the hype may have outpaced the reality for now. |
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Earnings Jitters Shake Tech Giants, Spotlight Shifts to Smaller Players |
The market witnessed a flurry of activity as major companies reported their quarterly results, leading to significant stock price movements.
Tech Giants Take a Hit: Despite beating earnings and revenue estimates, Alphabet (-5%) faced investor disappointment due to growing losses in its AI ventures and underwhelming YouTube ad revenue. This triggered a ripple effect, with Apple (-2.9%), Amazon (-3%), Meta Platforms (-5.7%), Microsoft (-3.6%), and Nvidia (-6.8%) also experiencing declines.
Telecom Sector Shines: AT&T (+5.2%) rallied on better-than-expected wireless subscriber growth, while Verizon (+2%) also saw gains, despite AT&T's slight revenue miss.
Defense Sector Mixed Bag: General Dynamics (-3.5%) disappointed with its quarterly results, contrasting with Lockheed Martin's (+2.6%) continued rise following its strong performance earlier in the week.
Consumer Woes: Lamb Weston Holdings, a restaurant supplier, plunged a record-breaking 28% due to disappointing fiscal fourth-quarter results and ongoing price pressures. Storage Sector Strength: Seagate Technology (+4%) impressed with better-than-expected results and an improved forecast for its fiscal first quarter. Tesla's Rough Ride Continues: Tesla (-12%) suffered its fourth consecutive quarter of disappointing earnings, further compounded by CEO Elon Musk's announcement of a delay in the launch of its robotaxi prototypes.
Financial Sector Under Pressure: Visa (-4%) also faced a decline as its quarterly results fell short of analyst expectations. Upcoming Events:
Investors eagerly await results from Chipotle, Ford, IBM, Waste Management, and Whirlpool, with a particular focus on Ford's incentive updates following General Motors' strong performance. Economic Data:
The government's first estimate of second-quarter GDP is expected to show growth, while the upcoming PCE report, the Fed's preferred inflation indicator, could significantly impact the market's outlook on future interest rate decisions. |
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MARKET MUSINGS & TIME CAPSULE |
Random Musings AI's Identity Crisis: If AI were a stock, would it be a growth stock or a value trap? Considering the recent market dip, maybe a little bit of both. The Magnificent Seven, Minus Two? Alphabet and Tesla's stumbles have us wondering if the "Magnificent Seven" needs a recount. The Market's Mood Swings: The stock market is like a teenager – one day it's on top of the world, the next it's throwing a tantrum. Maybe it just needs a nap.
The AI Paradox: AI is supposed to make our lives easier, but sometimes it feels like it's just creating more things to worry about.
The Power of Perspective: A market dip might feel like the end of the world, but history shows us that it's often just a blip on the radar. Keep calm and carry on, Trendsters. On this day in history, July 25 July 25, 1984: Sally Ride becomes the first American woman to walk in space. (A reminder that even in industries dominated by men, women can break barriers and reach new heights.)
July 25, 1943: Benito Mussolini is ousted as Prime Minister of Italy. (A reminder that even the most powerful figures can fall from grace when their strategies fail to deliver.)
July 25, 1909: Louis Blériot makes the first successful airplane flight across the English Channel. (A testament to human ingenuity and the ability to overcome seemingly impossible challenges.)
July 25, 1868: Wyoming Territory grants women the right to vote, a first in the United States. (A historical precedent for progressive change and the importance of inclusion.)
July 25, 1536: Sebastian de Belalcázar founds the city of Cali, Colombia. (A reminder of the enduring impact of exploration and expansion, even as today's markets grapple with new frontiers like AI.) |
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"At best, news is the tardy recognition of forces that have already been at work for some time and is startling only to those unaware of the trend." – Ralph Nelson Elliott
In today's news-driven market, it's easy to get swept up in the latest headlines and react impulsively. But as Elliott reminds us, news often merely confirms what the market has already been signaling.
So, instead of chasing the headlines, focus on understanding the underlying trends. By recognizing the forces at play, you can make more informed decisions and avoid being caught off guard by sudden shifts.
Remember, Trendsters, the market is a complex system with its own rhythm and patterns. By tuning into those patterns and staying ahead of the curve, you can position yourself for long-term success. |
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