Tuesday, June 20, 2023

↘️Here’s How Much AI Stocks Could Drop in the Coming Months

Good morning. Companies investing in artificial intelligence (AI) have been the market's biggest...
It's the monthly jobs numbers today and they're not going to be pretty and will be possibly the tip of the iceberg as we head into May.

Good morning. Companies investing in artificial intelligence (AI) have been the market's biggest movers this year. The large cap tech stocks pouring money into the technology have helped the overall stock market index rise following 2022's bear market.

But given how strong and how fast the rally has been, some see a pullback ahead. At its worst, it's possible that AI stocks will have a dot-com crash-type pullback. However, given that AI stocks haven't risen as much as the tech stocks did in the late 1990s, chances of that size of a pullback are slim.

A more moderate pullback of 10-20 percent for AI stocks over the summer seems more likely. That would also give stocks the pause they need to move higher into the end of the year. Traders should look for a small pullback in the coming weeks, and use that opportunity to profit on the short side… before pivoting to the long side, likely by late October to get past the market's seasonal weak months.

Now here's the rest of the news:

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MARKETS
DOW 34,299.12 -0.32%
S&P 4,409.59 -0.37%
NASDAQ 13,689.57 -0.68%
*As of market close
Stocks were closed on Monday, in honor of Juneteenth.

Today's TOP TIPS
Buy When the Bad News Piles In
Sometimes, it seems like a company can do no wrong. That's when it's a dangerous time to invest. That's because good news pushes prices higher. But once buyers are exhausted, even more good news is unlikely to move prices higher.

The reverse also holds true. When a company has had a series of poor earnings reports or other bad news, one more event likely won't move things too much lower.

» FULL STORY

Insider Activity Report: St. Joe Co (JOE)
Jorge Gonzalez, President and CEO at St. Joe Co (JOE) recently bought 1,200 shares. The buy increased his holdings by 3 percent, and came to a total price of $54,588.

This is the first insider buy in about a year. Gonzalez was also the most recent buyer in June 2022, picking up 1,200 shares at a price of $49,584. Since then, a director and major holder has sold shares on three occasions.

» FULL STORY

Unusual Options Activity: Kyndryl Holdings (KD)
IT services company Kyndryl Holdings (KD) is up 47 percent over the past year, about triple the move higher in the overall stock market. One trader sees a pullback in the coming weeks.

That's based on the July 21 $13 puts. With 31 days until expiration, 3,957 contracts traded compared to a prior open interest of 101, for a 34-fold rise in volume on the trade. The buyer of the puts paid $0.35 to make the bearish bet.

» FULL STORY

IN OTHER NEWS
Goldman Lowers China's Growth Forecast

Investment bank Goldman Sachs (GS) is lowering its estimate for gross domestic product (GDP) growth in China from 6 percent to 5.4 percent. Other investment banks have lowered their growth outlook for China, as the country has shown minimal changes in growth and other economic data since ending its strict Covid restrictions.
Buffett Increases Japanese Investments

Billionaire investor Warren Buffett has increased his holdings in Japan. Buffett owns the country's five largest trading houses, including Itochu (ITOCF), Marubeni (MARUY) and Mitsubishi (MITSY). Buffett started buying the stakes in 2020, and Japan's stock market has recently moved to multi-year highs.
Homebuyers Acclimate to Higher Interest Rates

While the Federal Reserve has hinted that interest rates may still increase twice more this year, and move half a point higher, homebuyers are getting used to today's mortgage rates. Two years ago, rates stood at historic lows, with 30-year fixed rate mortgages available for under 3 percent. Today, the rate is closer to 6.5 percent, which has led to a drop in mortgage demand.
Median Pay Continues to Rise

A survey of S&P 500 companies show that most of those firms paid their employees more in 2022 compared to 2021. About 100 of those companies reported that worker pay rose by 10 percent on average. The higher pay did not take into account tech company layoffs, which saw total workers decline, even if remaining workers were paid more on average.
Federal Agencies Report MOVEit Breach

The federal government has confirmed that multiple agencies, including the Department of Energy, have been hit by the MOVEit breach, a cyberattack using a file transfer tool that reportedly has a flaw. The government attributes the attacks to the Clop ransomware gang, which is linked with Russia.

S&P 500 MOVERS
TOP
BALL  6.882%
GLW 5.364%
DISH 3.606%
HSIC 3.18%
VTRS 3.135%
BOTTOM
ARE 4.672%
HUM 4.066%
ADSK 3.491%
STLD 3.464%
EPAM 3.349%

Quote of the Day
Wall Street remains upbeat that the AI wave won't be going away anytime soon and that investors will prefer US stocks as we see diverging central bank policies worldwide. This stock market rally seems a bit overextended but too much money remains on the sidelines, which means if the AI trade remains intact, this winning streak for the S&P 500 can continue.
- Ed Moya, senior market analyst at Oanda, on the market's bullish reaction to the end of the debt ceiling drama and the Federal Reserve's pause on interest rate increases.

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