Stock Rally Is Deepening Beyond AI-Fueled Craze
The stock rally driven by the exuberance surrounding artificial intelligence is widening beyond the tech industry, defying skeptics and raising concern about an overbought market.
Mounting bets that the Federal Reserve will end its tightening cycle sooner rather than later to prevent a recession added more fuel to the equity advance, with the S&P 500 topping 4,400 and rising for a sixth straight day.
The Nasdaq 100 extended this year’s surge to almost 40%, and the Dow Jones Industrial Average was on pace for its highest since December.
Microsoft Corp., which has unveiled a procession of AI-based products in recent months, climbed toward a record. Lennar Corp. led a rally in homebuilders on a bullish outlook.
Restaurant chain Cava Group Inc. more than doubled in its trading debut. Delta Air Lines Inc. climbed for a 15th straight session — which would be its longest winning run ever — after its board voted to restart the company’s quarterly dividend.
A gauge of U.S.-listed Chinese stocks jumped with Beijing seen rolling out more stimulus to help the economy.
Equities continued to gain traction after the U.S. benchmark crossed the bull-market threshold last week, surging more than 20% from its October low.
Traders kept piling into stocks even after the S&P 500’s 14-day relative strength index topped 70 — which is seen by some traders as one indication of an overbought market.
In a recent poll by the National Association of Active Investment Managers, equity exposure increased at the fastest pace in more than two years. At 90%, the reading was the highest since November 2021.
“U.S. stocks have defied skeptics and rallied this year in the face of bank collapses, constant fears of a recession, and what’s expected to be a slowdown in corporate profits,” said Arthur Hogan, chief market strategist at B. Riley Wealth. “For our part, we assume that inflation will look better in the second half.”
Market Breadth
Market breadth has improved notably, with multiple sectors exhibiting stronger relative strength trends, according to Dan Wantrobski at Janney Montgomery Scott.
