Momentum Monday - Google Leading AI Stocks Higher This Time With Gemini...

Every time the AI group pulls back and one venture thinks that maybe its best performance is behind, we see another strong earnings report that proves that thesis wrong. Two weeks ago, it was Broadcom (AVGO) announcing a surprise new $10-billion client. Last week, Oracle (ORCL) reported massive expected future growth. Those two reports rekindled the momentum behind AI-related stocks. We saw AI data center equipment companies like VRT and MOD bouncing back; energy providers like CEG and VST recovering above their 50dma; semiconductors like ARM coming back to life. The AI group is as strong as ever.

In the meantime, we are entering the Fed’s week. The market has already priced in a 25bps rate cut. The question is what guidance the Fed will provide for future cuts. Some like to complicate things and believe that the market will pull back after an obvious event – buy the rumor, sell the news. The market has lately been more direct and has just continued in the direction of the established trend. Market breadth has expanded, including more groups – small caps, biotech, housing, and solar. Any corrections have been short-lived and tepid and typically taken the form of sector rotation – when one group pulls back, others step up. I expect more of the same. The one factor that might change market sentiment is the Fed’s comment on employment. The market trades on narratives. If all of a sudden, higher unemployment and recession become the new story, then we are likely to see more volatility. Not enough evidence for any of it yet, but something to keep an eye on.