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Market Movers Weekly March 5/24 - Nasdaq Hits New Peak as AI Fuels Tech Surge; Apple Shifts Focus to AI Over EVs

Nasdaq AI Boom Apple AI Shift Fed Monetary Policy Market Trends

Hello, and welcome to this week's edition of Market Movers Weekly. This week we discuss how Nasdaq Composite hit a record high, surpassing its 2021 peak by climbing 1.14% to 16,274.94, driven by investor enthusiasm for megacap tech stocks amid signs of slowing inflation and anticipation of a boom in artificial intelligence. Moreover Nvidia's shares skyrocketed over 260% in the past year, with a significant 4% increase on the day, alongside gains in Meta. The Nasdaq's 1.74% rise this week, along with the S&P 500's 0.95% increase, marked their seventh positive week in eight, contrasting with a slight decrease in the Dow.

Investor focus is now on the Federal Reserve's interest rate decisions, especially with Jerome Powell's upcoming semiannual monetary policy report to Congress, providing insights into potential rate adjustments. Despite early expectations for rate cuts, the market now predicts a more cautious approach, with a quarter percentage point reduction possibly starting in June. Powell's addresses are particularly awaited for hints towards achieving the Fed's 2% inflation target, preceding the February jobs report and the Fed's March meeting.

Amidst this, stock markets are anticipated to maintain their upward trajectory, amidst varying views on the sustainability of these trends and the broader economic landscape.

Barclays Boosts S&P 500 Outlook Amid Tech Surge and Economic Resilience

Barclays has increased its S&P 500 year-end forecast for 2024 to 5,300 from 4,800, indicating optimism with a 4.5% potential rise from recent figures. This revision aligns with a period where the S&P 500 briefly exceeded 5,100, driven by the technology sector's strength, particularly due to AI's impact on profitability. Now close to UBS's 5,400 target, Barclays attributes its outlook to a durable U.S. economy and robust Big Tech earnings. The bank has also updated the S&P 500's full-year earnings prediction to $235 per share from $233, emphasizing Big Tech's significant role in the index's earnings growth. This optimistic view balances the potential for a bullish scenario pushing the index to 6,050 against a bearish downturn to 4,500, favoring a bullish tilt based on macroeconomic data suggesting a higher chance of economic acceleration over a mild recession​.

Apollo Global's Chief Economist Predicts Steady Fed Rates Amid Inflation Concerns

Apollo Global Management's chief economist, Torsten Slok, forecasts that the Federal Reserve will not lower interest rates in 2024, countering earlier market predictions of cuts. He highlights a resilient U.S. economy and persistent inflation as key reasons, suggesting that the Fed's primary focus will be on combating inflation, leading to a scenario where interest rates remain elevated for a longer period. This stance aligns with broader economic indicators and the Fed's strategic balance between fostering economic growth and ensuring price stability amid recent banking sector challenges.

Hedge Funds Target Health-Care and Auto Stocks Amid Market Highs

In February, amidst a market surge, hedge funds targeted certain stocks for short selling, notably within the healthcare and automotive sectors, despite broad market gains. The Nasdaq led the increase with 5.8%, the S&P 500 rose by 5%, and the Dow saw a 2% improvement, achieving its first four-month win streak since May 2021. Despite this, there's skepticism, especially regarding the AI-driven tech rally's sustainability. CNBC Pro analysis, using FactSet data, highlighted stocks with high short interest, focusing on companies like Novavax in healthcare, which saw increased short interest, and retail players like Children’s Place, amid financial restructuring efforts. Similarly, electric vehicle companies such as Fisker and Lucid Group, along with Carvana, also faced notable short-selling activity, indicating hedge funds' cautious stance amidst market optimism.

Apple Pivots from Electric Cars to Artificial Intelligence, UBS Predicts

Apple has reportedly halted its electric vehicle project, which was in development for over a decade, to focus on artificial intelligence initiatives. This strategic shift reflects the company's prioritization of AI, with expectations of introducing AI features in upcoming iOS versions and enhancing core services like Siri. The decision, affecting over 2,000 employees, aligns with Apple's long-term profitability focus, emphasizing AI over automotive ventures

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