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Jul 5, 2023

2023 Midway Report: Stocks Show Resilience Amidst Global Uncertainties

By:JJ Kinahan

Market expectations for the second half of 2023 rely upon an understanding of current challenges and what drove the markets during the first half.

Despite a nearly stagnant day of trading on Monday, stock indices maintained their strong performance in the first half of the year. The Nasdaq Composite led the pack with an impressive 32% increase, closely followed by the S&P 500, which posted a solid 16% gain.

Tech stocks drive the market

The remarkable surge in stock prices was largely driven by the technology sector, with notable contributions from companies like Nvidia (NVDA) and Advanced Micro Devices (AMD). Nvidia's stock nearly tripled in price, while AMD almost doubled in value compared to the end of 2022. However, the looming question remains: Can these tech stocks continue to propel the market upward, especially with escalating trade tensions between the United States and China?

Last week, the Biden administration announced plans to impose further restrictions on the sale of chips used in artificial intelligence (AI) to China. In addition, cloud computing companies like Amazon (AMZN) and Microsoft (MSFT) are expected to face additional restrictions, necessitating government approval for providing advanced AI technology services. In response, China retaliated by announcing restrictions on the export of crucial chip-making metals. What's more, disappointing services industry data from China has also contributed to losses in Chinese stocks.

Amidst these developments, several individual stocks have captured market attention during premarket trading. Tesla (TSLA), for instance, remained unchanged but made waves by announcing record-breaking delivery figures of 466,140 automobiles in Q2, surpassing Wall Street estimates. Rivian (RIVN), another electric vehicle (EV) manufacturer, also impressed observers by delivering 12,640 vehicles in Q2, exceeding the projected figure of 11,000. Amazon's partnership with Rivian will deploy their first fleet of electric delivery vans.

Up next: Meta, Netflix and new labor data

Other companies in the spotlight include Meta (META, formerly Facebook) and Netflix (NFLX). Meta is expected to unveil a service called Threads, aimed at rivaling Twitter, with a potential launch as early as tomorrow. Netflix received an upgrade to a neutral rating from Goldman Sachs, citing the company's efforts to combat password sharing and its growth in new subscribers. In addition, Yahoo is reportedly considering an initial public offering (IPO), following a trend of companies capitalizing on robust stock prices instead of opting for debt financing amid rising interest rates.

While this week is short because of the holiday, agencies are still set to release significant economic data. Later today, the Fed Open Market Committee (FOMC) will make public the minutes from its most recent meeting. Market expectations suggest that the Fed will raise interest rates by a quarter point when it convenes in a few weeks. Tomorrow, the JOLT report will provide information into job openings and, on Friday, the June employment report will be published. Consequently, despite potentially lower trading volume, stocks have ample opportunity for fluctuations. Investors may want to adhere to their long-term objectives during this period of market activity.

JJ Kinahan is the CEO of IG North America—which includes tastylive, tastytrade and IG's FX Business. Kinahan traded for 21 years at the Chicago Board Options Exchange. He serves on the CBOE Advisory Board and the SIFMA Options Committee.

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