The stock market enjoyed another bullish session on Monday to close at all-time highs (“ATH”). All three indices are at records: S&P 500 (IVV), Nasdaq (QQQ), and the Dow Jones. In after-hours trading, markets recognized that Iran and the U.S. will not have a resolution anytime soon.
The Strait of Hormuz, closed since February, will accelerate its inflationary pressures on the energy markets. This creates serious pressure on the indices. Technology firms like Alphabet (GOOG), Apple (AAPL), and NVIDIA (NVDA) account for most of the market’s gains. Rising inflation would hurt consumer confidence and their disposable income. When consumers spend less, the economy slows.
In a slow economy, companies no longer have the luxury to spend heavily on AI services. In the last week, stock markets priced in weakness ahead for AI chatbot usage. Traders accumulated software firms like Workday (WDAY), Salesforce (CRM), Snowflake (SNOW), Adobe (ADBE), and ServiceNow (NOW).
In the last year, software stocks fell due to the fear that AI could write code, replacing their services. Markets realize that chatbots cost too much to replace staff in some cases. Firms like ServiceNow are deeply entrenched in the workflow process. Companies cannot stop paying for the monthly subscription fees.
Your Takeaway
The stock markets are at risk of pulling back from their ATHs. For now, expect more records, fueled by enthusiasm for the SpaceX, Anthropic, and OpenAI IPOs. Momentum traders will bid for those three firms. If no new money enters the stock market, that could send stocks excluding those three IPOs lower.
