Stocks kicked off the third quarter on an upbeat note Monday, with the Nasdaq Composite leading major indexes higher. Tesla shares electrified the mood, surging 6% ahead of the EV leader's quarterly deliveries report due Tuesday.
But even as the tech rally powered on, storm clouds gathered on the horizon. Signs of an economic cooldown emerged, with U.S. manufacturing activity contracting further in June to hit a four-month low. The Institute for Supply Management's manufacturing PMI registered a weaker-than-expected 48.5 reading, reflecting waning demand as businesses hold back on investment.
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Slowing factory activity raised fresh concerns about corporate earnings prospects in the second half of 2024. While investor optimism currently abounds, a raft of disappointing profit results could quickly shift sentiment - especially heading into the summer months that typically see increased volatility.
The elephant in the room remained President Biden's political future. His shaky debate performance last week amplified worries about whether he'll stay in the race, with a CBS poll showing just 27% now see him as cognitively fit for office. While allies like Barack Obama voiced support, the swirling uncertainty injects risk that could further rattle markets.
Of course, the other key factor overhanging stocks remains the Federal Reserve's rate path. Investors are desperately hoping the upcoming June jobs report shows labor market cooling that would clear the path for rate cuts by year-end. Most expect that economic relief would provide another upside catalyst.
Signs of opportunity persisted amid the crosscurrents. Chewy shares spiked over 20% at one point after investor Keith Gill disclosed a 6.6% stake in the pet retailer. And Boeing's $3.8 billion acquisition of supplier Spirit AeroSystems lifted the aerospace giant's stock over 2%.
But the broader landscape looks more complicated as Wall Street kicks off the second half. While Silicon Valley titans like Tesla and Nvidia continue displaying market-leading strength, the risks of a potential storm are increasing. Corporate guidance, economic data flow, and political turbulence all loom as potential rally-enders in the coming months.
For now, the bulls remain in charge. But to keep driving markets higher, the tech juggernauts may need to pull off some fancy maneuvering to sidestep the mounting headwinds gathering force.
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