Market Commentary
Brian Stutland

Introduction:

As the opening bell rings on June 2nd, 2023, investors are turning their attention to the AI-driven market that has been dominating the scene this year. With the jobs report behind us and no immediate signs of a recession, the focus remains on the stocks benefiting from artificial intelligence. While a strong economy may lead to higher interest rates, the top AI stocks have positioned themselves well to weather such conditions. Companies like MSFT, AAPL, GOOGL, and AMZN, armed with cash reserves, are poised to seize opportunities as weaker startups falter. However, the concentration of gains in the market raises concerns, with consumer discretionary stocks lagging behind the tech rally. Additionally, troubling data suggests that the S&P 500 is witnessing a high in new 52-week lows for the year. Let’s delve deeper into these factors and their implications as we approach the opening bell.

AI Stocks: Benefiting from a Strong Economy and Higher Interest Rates:
With a robust economy and the possibility of higher interest rates, the AI stocks have emerged as the frontrunners in the market. Companies such as MSFT, AAPL, GOOGL, and AMZN, who have harnessed the power of AI, continue to drive significant gains. Their strong financial positions, with ample cash reserves, allow them to capitalize on any opportunities that may arise from startups facing debt troubles. The positive numbers witnessed recently further support the notion that these stocks are likely to maintain their momentum.

Concentration of Gains: Disparity between Tech and Consumer Discretionary Stocks:
While AI stocks thrive, there is a growing disparity between the performance of tech stocks and consumer discretionary stocks. Consumer discretionary sectors, which traditionally play a crucial role in the American economy, have not experienced the same level of rally seen in the tech sector. This divergence warrants close attention, considering that consumer spending contributes significantly to the overall economic growth.

Troubling Data: New 52-Week Lows in global stocks is on the high for the year:
Another cause for concern is the observation that the S&P 500 is witnessing a high for the year while globally the MSCI ex US index shows 75% of their stocks are on new 52-week lows for the year. Historically, being at a high point for both the Index and new 52-week lows signifies potential dangers for the market. This data point raises cautionary flags, highlighting the need for vigilance and careful monitoring as we navigate through the market landscape.

Conclusion:
As the opening bell approaches on June 2nd, 2023, the market’s focus remains on AI stocks, which continue to drive gains in the face of a strong economy. While the concentration of gains raises questions about the lagging performance of consumer discretionary stocks, the overall impact on the American economy must not be overlooked. Additionally, the presence of a high number of new 52-week lows in the S&P 500 signals a potential cause for concern. Investors should exercise caution and remain vigilant as they navigate through the market, assessing opportunities and managing risks in this dynamic landscape.

Stay informed, stay proactive, and make strategic decisions as you prepare for the opening bell today.

Here is what else you need to know today:

  • The US economy added 339,000 jobs in May, beating expectations of 325,000. The unemployment rate remained unchanged at 3.6%.
  • Amazon is in talks to offer a mobile service to US Prime members. The service would compete with Verizon, AT&T, and T-Mobile.
  • US yields spiked higher after the strong jobs report. The yield on the 10-year Treasury note rose to 3.07%.
  • China is mulling a new property support package to boost the economy. The package could include tax breaks and subsidies for homebuyers.

These are just a few of the top stories from today.