- Stocks had a strong week as geopolitical tensions eased.
- Market participants are expecting more gains for US stocks in the second half.
- US data revealed weaker-than-expected job growth in June.
Equities recovered on Monday as growth stocks found their footing amid an easing of Fed rate hike bets. The rebound came after a brief dip on Thursday due to a poor US jobs report. At the same time, progress in talks between the US and Iran supported risk appetite.
Stocks had a strong week as geopolitical tensions eased and talks between the US and Iran went on well. At the same time, tech stocks picked up after a sharp selloff in the previous week. The FOMC meeting left most investors surprised as policymakers revealed a more hawkish tone than expected. The result was a surge in rate hike expectations. At the same time, the timing for the hike was pushed forward, and traders were expecting more than one such move this year.
High borrowing costs hurt businesses, especially in the tech industry. Consequently, tech companies shed some of their gains.
US chip stocks (Source: Bloomberg)
Nevertheless, most closed the second quarter of the year green after an unbelievable rally that propelled the stock market. The gains came despite the Iran war as tech companies reported upbeat earnings. Market participants are expecting another good performance in the second half. However, experts have warned that it will depend on fundamentals.
“Expectations are really high, and so I don’t know if you’re going to see as much upside in the second half in these stocks as we did in the first half,” said Anthony Saglimbene, Ameriprise Financial’s chief market strategist. “As long as they confirm that fundamentals are strong, then I think they could probably melt a little bit higher.”
On Thursday, equities dipped after US data revealed weaker-than-expected job growth in June. According to the Bureau of Labor Statistics, the economy added 57,000 new jobs compared to the forecast of 114,000. Moreover, the 172,000 reported in the previous month was revised lower to 129,000. The poor figures led to fears of an economic slowdown that weighed on equities.
However, a decline in rate hike expectations allowed stocks to recover on Monday. At the same time, risk sentiment was boosted by the ongoing talks between the US and Iran in Qatar that could yield a longer-lasting deal to end their war.