In the most recent Daily Market Notes report distributed to investors, Navellier & Associates analysts assert that robust earnings releases from Microsoft (NASDAQ: MSFT) and Alphabet (NASDAQ: GOOGL) have injected fresh optimism into the AI sector’s trajectory during the current earnings season.
The analysts underline that stocks are witnessing their most promising week of the year, rebounding from the initial significant downturn since the robust rally initiated in late October. They spotlight the pivotal role of big tech in leading this resurgence, noting that the “Magnificent 7” surged 3.3% in early trading, marking a 4.4% increase for the week.
Despite initial concerns stemming from cautious remarks by Taiwan Semiconductor (TSM) affecting Nvidia’s (NVDA) stock performance, the assurance of substantial AI infrastructure investments from major tech corporations spurred NVDA’s recovery to $873.
The resurgence of confidence was notably bolstered by Alphabet’s impressive financial results, which not only surpassed earnings projections but also unveiled a noteworthy share repurchase program and introduced a new dividend, propelling its shares to record highs with a remarkable 10% surge.
Emphasizing the significance of robust earnings from big tech, the analysts stress their substantial influence not only on market indexes but also on overall earnings.
However, the report acknowledges that not all tech entities enjoyed favorable outcomes. Intel (NASDAQ: INTC) reported disappointing top-line figures and lower-than-anticipated margins due to its limited exposure to AI, resulting in an 11.2% decline in its stock value.
Amid broader market concerns regarding elevated Personal Consumption Expenditures (PCE) inflation, fears were assuaged as both headline and core PCE for March aligned with forecasts, offering respite to the bond market.
Meanwhile, marginal decreases in yields were observed for both the US 10-year Treasury note and the 2-year note, reflecting market adjustments in response to a protracted path toward inflation reduction.
On the consumer front, the latest University of Michigan survey indicated stable inflation expectations but a slight decline in consumer sentiment, albeit remaining near a three-year peak.
Sector-specific performance exhibited divergence, with Exxon (CVX) and Chevron (NYSE: CVX) (NYSE: XOM) witnessing declines following earnings disappointments, contrasting with the minimal impact of energy stocks on broader indices.
The analysts maintain that the robust recovery witnessed this week reaffirms the prevailing “buy-the-dip” sentiment, highlighting the enduring importance of the AI theme, albeit against the backdrop of ongoing uncertainty regarding potential Fed rate cuts.
“In light of robust employment figures and sustained consumer expenditure—April personal spending exceeded forecasts at +0.8%—market momentum has decidedly shifted towards the positive,” they conclude.