US Stock Market: Nasdaq Rises on AI Rebound...Fed's Hawkish Warning Lights

▲ US Stock Market, Nasdaq, Dow Jones, Bull market, Bear market, Mixed trend/AI generated image

Nasdaq 100 futures jumped 1.1% as semiconductor stocks led the rebound in the US stock market. However, with semiconductor ETFs plummeting 11.4% in July and the possibility of the US Federal Reserve raising interest rates again, the tech rally faces a severe test.

According to financial news outlet Barron's on July 6 (local time), Nasdaq 100 futures rose 1.1% and S&P 500 futures rose 0.5% ahead of the opening of the US stock market. Dow Jones Industrial Average futures fell 28 points, or 0.1%. As tech stocks led the gains, market attention turned to the semiconductor sector.

Semiconductor stocks have already undergone sharp corrections. The Invesco PHLX Semiconductor ETF, which tracks US-listed semiconductor stocks, has fallen 11.4% in July. SK Hynix is pursuing a plan to raise over $29 billion by issuing American Depositary Receipts (ADRs) on Nasdaq this week. The Dow closed at its 20th record high of the year last Thursday, but the S&P 500 and Nasdaq Composite indices fell. However, all three major indices ended the shortened trading week higher.

A variable weighing on tech stocks is the caution surrounding interest rate hikes. Investors are closely watching the minutes of the Federal Reserve's June monetary policy meeting, which was chaired for the first time by Kevin Warsh, who took office at the end of May, succeeding Jerome Powell. Chairman Warsh reiterated the Fed's 2% inflation target, and Wall Street interpreted his remarks as hawkish. ING analyst Chris Turner stated, “The key will be a hawkish message that the Fed is committed to restoring price stability after failing to meet its target for five consecutive years,” adding, “Some or many members may view the Fed's next move as an interest rate hike.” The US 10-year Treasury yield recorded 4.461%.

Despite doubts about the AI rally, tech stock earnings were still identified as a key driver of the US stock market's rise. Thomas Mathews, Head of Asia-Pacific Markets at Capital Economics, stated, “I don't think the AI rally has run out of steam.” He assessed that tech company earnings show “little sign of faltering” and that earnings forecasts for the tech sector have risen at “an almost unprecedented pace.”

Falling oil prices were presented as a variable that could ease inflation concerns. OPEC+, the Organization of the Petroleum Exporting Countries and its allies, decided to increase production by approximately 188,000 barrels per day in August, and West Texas Intermediate (WTI) futures traded below $69 per barrel. With corporate news driving the stock market, the market this week is focused on the trend of semiconductor stocks and the minutes of the Fed's June meeting.

[Article Key Summary]

-Nasdaq 100 futures rose 1.1% led by semiconductor stocks, and S&P 500 futures also rose 0.5%.

-Semiconductor ETFs have fallen 11.4% in July, and the market is wary of the Fed's potential interest rate hike.

-Capital Economics assessed that the AI rally has not run out of steam and that tech stock earnings forecasts have risen at an almost unprecedented pace.

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