Wednesday's Market Minute: So Far, So Good

It's been a pretty dreamy scenario for stock bulls. You know the good times are back when Carvana CVNA shares are closing in on a year-to-date rally of 1,000%. Watch for IPOs to pick up in the coming weeks if that type of action holds as companies look to take advantage of the most peaceful macro backdrop in seemingly ages.

That's still the main driver of this uptrend: dampening inflation and a less aggressive Federal Reserve. Perhaps more precisely, the first general harmony between the Fed and the market in some time, with both signaling a pause in hikes after one more this month. Markets may be getting a bit greedy again pricing in cuts next year, so be mindful of that as a potential point of conflict if the market's timeline for rate-cuts moves up too much.

With the dollar under pressure and rates contained, there's not a lot to move the dial in the macro world until we get that next Fed hike. In the meantime, it's all about earnings. The two big themes for this earnings season are: 1) Regional bank solvency and 2) AI living up to the hype.

 So far, banks are looking mixed, but so far no shockers on the subject that scared investors back in the first quarter after Silicon Valley went bust. Real estate is taking some hits as expected, and deposits are following the rule of "the bigger the better" as they flow up toward the biggest financial institutions, but nothing looks like a systemic problem. The regional bank ETF KRE is trying to break out above resistance at $45, which would be a very encouraging thing. Watch PacWest PACW and Western Alliance WAL in the second half of this week to determine if that breakout happens.

As far as AI goes, semiconductors are going to have a high bar to live up to, given the hardware providers for this purported revolution should already be seeing sales. But with AI services like Microsoft's "Copilot" just being rolled out, this theme may not have to deliver quite yet. It could be a dramatic quarter for chips, but the software providers are still going to be in development mode.

Image sourced from Shutterstock

This post contains sponsored content. This content is for informational purposes only and not intended to be investing advice.

Image sourced from Shutterstock

This post contains sponsored content. This content is for informational purposes only and not intended to be investing advice.