U.S. Stocks Surge, Nasdaq Composite Sets New Record

The U.S. stock market showed strong performance on the first trading day of the third quarter, with the Nasdaq Composite closing at a record high.At the close of trading on July 1, the Nasdaq Composite index rose 0.83% to 17,879.30 points, marking an all-time high. The S&P 500 index increased by 0.27% to 5,475.09 points. The Dow Jones index also climbed 50.66 points (approximately 0.13%) to 39,169.52 points.

Technology stocks, particularly those related to artificial intelligence (AI), led the gains in this trading session. Specifically, Microsoft rose by 2.2%, Apple jumped by 2.9%, and Nvidia gained 0.6%. The entire technology sector increased by 1.3% at the start of the week, month, and quarter.

The upward trend in technology stocks indicates that the AI frenzy has not cooled down on Wall Street. Nvidia’s stock surged by 150% in the first half of the year, contributing to the S&P 500's 14.5% increase. The Nasdaq Composite also rose by 18.1% in the first six months of the year, while the Dow Jones increased by 3.8%.

Despite the rise in U.S. Treasury yields, major U.S. stock indices continued to climb. The 10-year Treasury yield increased by nearly 13 basis points to 4.471%. The 2-year Treasury yield rose by 4 basis points to 4.762%.

According to Joseph Cusick, a portfolio expert at Calamos Investments, the narrow breadth of the rally could negatively impact Wall Street's performance in the second half of the year. He pointed out that the top 10 stocks accounted for 33% of the total weight of the S&P 500, a record level of concentration.

Cusick recommended, “Investors should proactively manage their portfolios and diversify their strategies, especially when the market is at all-time highs.”

Some experts expect the rally in technology stocks to continue throughout the summer. Kevin Philip, a partner at Bel Air Investment Advisors, believes that the AI boom is not just a temporary trend. He stated, “AI has the potential to drive business productivity, improve technology quickly and efficiently, and create new industries by combining AI with increasingly powerful processing capabilities.”

Seema Shah, Chief Global Strategist at Principal Asset Management, also expressed optimism about the outlook for risk assets like stocks in the second half of the year, despite lower expectations for a Fed rate cut compared to the beginning of the year.

U.S. manufacturing PMI data for June showed that manufacturing declined for the third consecutive month. The Personal Consumption Expenditures (PCE) price index reported last week dropped to its lowest level in six months, a positive sign for the Fed’s battle against inflation.

This week, U.S. financial markets will be closed on Thursday, July 4, for Independence Day. On July 5, the U.S. Department of Labor will release the June jobs report, which could influence the Fed’s monetary policy decisions. The market is also awaiting a speech from Fed Chairman Jerome Powell on Tuesday and the release of the Fed’s June meeting minutes on Wednesday.