ai stocks

Riding the Unstoppable Wave: Market Momentum and the AI Revolution

By:JJ Kinahan

AI Pushes Stocks Higher: TSLA, NFLX, IBM Earnings in Focus

  • Investors are feeling confident—inflation is stabilizing and the market is surging, fueled by AI and better-than-expected earnings reports.
  • AI's transformative power elevates tech giants, Microsoft and Meta, reshaping market dynamics.
  • Consumer spending remains steady, but investors remain cautious amid potential market shocks and consolidation.

The stock market has been on a relentless rise, displaying the classic "can't stop, won't stop" attitude. On Tuesday, the S&P 500 and Nasdaq Composite added 0.7% and 0.8%, respectively, contributing to what has already been a strong year for investors.

These impressive gains have been fueled by positive individual company news, better-than-expected earnings, and stable inflation indicators. As we await earnings reports from some of the most familiar household names, the momentum feels palpable.

The power of AI

One undeniable trend in the current market is an overwhelming fascination with Artificial Intelligence (AI). Microsoft (MSFT), one of the tech giants at the forefront of AI development, recently unveiled plans to offer new AI products to consumers and businesses for a monthly fee of $30—a premium compared to its least expensive version of Office 365.

Moreover, the company announced a groundbreaking partnership with Meta (META), Facebook's parent company, to release a new version of Meta's AI language called Llama 2. This exciting news alone boosted Microsoft's shares by 4%, contributing to a staggering $100 billion increase in its market cap. Other AI-related stocks also saw an upswing, with shares in Nvidia (NVDA) jumping over 2%.

Earnings season is in full swing, with over 7% of the S&P 500 companies having already reported. Impressively, approximately 80% of these companies have surpassed earnings estimates. Experts predicted a 7.5% decline in profits, but this projection has improved to only a 7% decrease.

However, not all companies managed to beat expectations, as evidenced by Goldman Sachs' report of a 58% drop in income. The decline was attributed to reduced investment banking and advisory fees. Interestingly, some other banks reported surprising strength in their trading revenue, hinting at unexpected developments within the financial sector.

In the automotive industry, Carvana made headlines by reporting earnings ahead of schedule. The company pleasantly surprised investors with better-than-expected revenues and profits. Additionally, Carvana announced a significant debt restructuring plan, aimed at reducing its shorter-term obligations. As a result, the company's shares surged by over 25% in premarket trading, signaling a favorable outlook for the car seller.

Consumers keep spending

Turning our attention to consumer behavior, retail sales for June increased 0.2% increase from May. That figure aligns with the recent monthly reading on the consumer prices index, indicating consumers are maintaining a spending pace consistent with inflation.

This positive news bodes well for the upcoming back-to-school shopping season. Moreover, my observation is that inflation appears to be stabilizing, a sentiment reinforced by a slight rebound in the U.S. dollar. The Federal Reserve is expected to raise interest rates by a quarter of a point next week, further clarifying the interest rate outlook.

In anticipation of market-moving earnings reports, IBM ((BM), Netflix (NFLX) and Tesla (TSLA) are scheduled to release their financial results. Investors are keen to learn if IBM has any notable developments in the AI sector and how the market will respond to such news. For Netflix, the focus will be on subscriber growth, especially after its recent efforts to curb password sharing and encourage paid use of its services. As for Tesla, investors are eager to assess the impact of its strategy to capture greater market share by lowering car prices this year. Additionally, the company's recent deals with other electric vehicle manufacturers to use Tesla charging stations may influence its earnings.

Volatility watch

A key factor to watch closely is market volatility. The VIX, often regarded as a fear gauge, has been trading near 13.30 in premarket, suggesting a prolonged period of consolidation. Some interpret this as a sign of market complacency, while others consider it a potential setup for a market shock. Nonetheless, with inflation stabilizing and earnings largely exceeding expectations so far, the market appears robust for the time being. The upcoming earnings reports may provide more insight into the market's trajectory. As always, stick with your investing plans and focus on long-term goals amid market fluctuations.

The current market continues to impress with its unyielding momentum. AI remains a hot topic, and companies like Microsoft are capitalizing on the trend. Earnings reports have delivered pleasant surprises, especially with the strong showing in the trading revenue of some banks. The automotive sector also displayed positive signs with Carvana's impressive performance. Inflation stability and consumer spending are contributing to market confidence. However, market participants should remain vigilant and adaptable, as uncertainties and potential shocks persist. Stay committed to your investment strategies and objectives to weather any market fluctuations that lie ahead.

JJ Kinahan is 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. @thejjkinahan 

For live daily programming, market news and commentary, visit tastylive or the YouTube channels tastylive (for options traders), and tastyliveTrending for stocks, futures, forex & macro.

Trade with a better broker, open a tastytrade account today. tastylive, Inc. and tastytrade, Inc. are separate but affiliated companies.

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

Related Posts

tastylive content is created, produced, and provided solely by tastylive, Inc. (“tastylive”) and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, digital asset, other product, transaction, or investment strategy is suitable for any person. Trading securities, futures products, and digital assets involve risk and may result in a loss greater than the original amount invested. tastylive, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastylive is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparisons, statistics, or other technical data, if applicable, will be supplied upon request. tastylive is not a licensed financial adviser, registered investment adviser, or a registered broker-dealer.  Options, futures, and futures options are not suitable for all investors.  Prior to trading securities, options, futures, or futures options, please read the applicable risk disclosures, including, but not limited to, the Characteristics and Risks of Standardized Options Disclosure and the Futures and Exchange-Traded Options Risk Disclosure found on

tastytrade, Inc. ("tastytrade”) is a registered broker-dealer and member of FINRA, NFA, and SIPC. tastytrade was previously known as tastyworks, Inc. (“tastyworks”). tastytrade offers self-directed brokerage accounts to its customers. tastytrade does not give financial or trading advice, nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of tastytrade’s systems, services or products. tastytrade is a wholly-owned subsidiary of tastylive, Inc.

tastytrade has entered into a Marketing Agreement with tastylive (“Marketing Agent”) whereby tastytrade pays compensation to Marketing Agent to recommend tastytrade’s brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastytrade. tastytrade and Marketing Agent are separate entities with their own products and services. tastylive is the parent company of tastytrade.

tastycrypto is provided solely by tasty Software Solutions, LLC. tasty Software Solutions, LLC is a separate but affiliate company of tastylive, Inc. Neither tastylive nor any of its affiliates are responsible for the products or services provided by tasty Software Solutions, LLC. Cryptocurrency trading is not suitable for all investors due to the number of risks involved. The value of any cryptocurrency, including digital assets pegged to fiat currency, commodities, or any other asset, may go to zero.

© copyright 2013 - 2024 tastylive, Inc. All Rights Reserved.  Applicable portions of the Terms of Use on apply.  Reproduction, adaptation, distribution, public display, exhibition for profit, or storage in any electronic storage media in whole or in part is prohibited under penalty of law, provided that you may download tastylive’s podcasts as necessary to view for personal use. tastylive was previously known as tastytrade, Inc. tastylive is a trademark/servicemark owned by tastylive, Inc.