As of press time, the three major indexes have mixed ups and downs, with the Nasdaq down 0.22%, the S&P 500 up 0.09%, and the Dow up 0.76%.

Thursday (July 4th) is Independence Day holiday in the United States, and the US stock market will be closed. On Friday, the US Department of Labor will release the June non-farm payroll report, and investors will get important clues about the labor market from it.

The US stock market performed strongly in the first half of 2024. Driven by the AI craze and Nvidia and other stocks, the S&P 500 index rose by 14.5%, the Nasdaq rose by 18.1%, and the Dow rose by about 3.8%.

In the second quarter, the S&P 500 index and the Nasdaq rose by 3.9% and 8.3%, respectively, while the Dow fell by 1.7%. The Nasdaq has recorded a continuous rise for the first time since the end of 2021 for five consecutive quarters.

Some people expect the technology-driven US stock market rally to continue at least throughout the summer. But some people are worried that the P/E ratio of the US stock market has reached a very high level.

King Lip, chief strategist of BakerAvenue Wealth Management, said, 'We have not seen much evidence of slowing momentum in tech stocks, and you can actually say it's accelerating.'

He believes that the tech stocks industry will encounter some resistance due to profit taking and seasonal weakness in September and October, as well as before and after the presidential election, but the valuation of tech stocks makes sense. He said, 'The reality is that these companies have weathered the storms, managed them very well, and can significantly increase profits during periods of economic growth. These companies are already very mature.'

The epic rise in the stock prices of the US technology giants has far outstripped the growth rate of their profits, which could mean that the S&P 500 index (SPX) looks more vulnerable, according to Torsten Slok, the chief economist of Apollo Global Management. In a report last Sunday, he pointed out that the top 10 companies in the S&P 500 index account for 35% of the index's market cap, but only 23% of the index's earnings. Slok wrote, "This difference has never been so big, which indicates a record-breaking optimism among the market for the earnings prospects of the top 10 companies in the index. In other words, the problem with S&P 500 index is not only high concentration, but also an historically highly optimistic attitude of a small number of companies towards future earnings." Due to the fact that the S&P 500 index is market cap-weighted, the soaring stock prices of large technology companies that have surged on the wave of artificial intelligence mean that the recent US stock market gains have been concentrated in only a few stocks, masking relatively mediocre performance in other parts of the index.

He pointed out in a report that the top 10 companies in the S&P 500 index account for 35% of the market value of the index, but only 23% of the returns.

Slok wrote, "This difference has never been so big before, which indicates record optimism among the market for the future earnings of the top 10 companies in the index. In other words, the problem with the S&P 500 index isn't just its high concentration. A small group of companies are also historically optimistic about their future earnings". As the market becomes more concentrated so do investors' portfolios, especially given the growing popularity of funds which track indices. The average weighting of large-cap funds for the S&P 500 index in their portfolios has increased to 33%, according to a recent Bank of America research report, from 26% in December 2022. In that same time, the top five holdings for these funds have gone from under 5% to over 25% of their portfolios.

Slok warned, 'Such high concentration means that if Nvidia continues to rise, the situation will be very good. But if it begins to fall, the S&P 500 index will be heavily impacted.'

Tom Lee, co-founder of Fundstrat Global Advisors, recently said that the S&P 500 index may reach 15,000 points by the end of this decade.

Morgan Stanley strategists said that stock market investors in the US election season should continue to choose stocks and maintain their preference for high-quality US stocks, as the market is considering the scenario of Republican victory after last week's debates.

They point out that the US presidential election debate has increased the possibility of Trump being re-elected, which will make the outside world pay more attention to his immigration and trade policies. Bond traders are also preparing for this situation.

Michael Wilson, the strategist at Morgan Stanley, said that given the possibility of Republican victory, investors should focus on high-quality stocks, which typically have more stable income, stronger balance sheets and higher gross margins, and keep away from small-cap cyclical stocks.

They said, 'In the context of Republican victory, the growth bias is tilted downward, in part due to immigration reform.' Given that inflation and fiscal sustainability have also become focal points, this dynamic 'may not be favorable to low-quality cyclical sectors and small-cap stocks in the market.'

Market attention is still focused on when the Federal Reserve will begin to cut interest rates, as data released last week showed no change in the monthly inflation rate in May.

As of May, the personal consumption expenditure (PCE) price index for goods and services rose by 2.6% compared to the previous year, which was the same as the increase in April. Last month's inflation data met economists' expectations but still exceeded the Fed's target of 2% inflation.

However, according to the FedWatch tool of the Chicago Mercantile Exchange, the market still expects the Federal Reserve to cut interest rates at least twice this year, with a 63% chance of a cut in September.

Investor attention this week will focus on the minutes of the Fed's June meeting, which will provide more clues about the Fed's thinking, and then shift to the labor market report on Friday. The Fed predicted in June that it would only cut interest rates once in 2024.

The release of the U.S. June nonfarm payroll report this Friday will provide a powerful perspective on the labor market, and the latest salary and job vacancy situation of private enterprises will also be the focus of this week.

According to Bloomberg data, the report is expected to show that the US economy added 188,000 non-farm jobs last month, with the unemployment rate remaining stable at 4%. In May, the US economy added 272,000 jobs and the unemployment rate rose slightly to 4%. The latest information on manufacturing and service activity will also be scattered throughout the agenda.

Focus stocks

Large-cap tech stocks are mixed, with AI concept leaders falling. Nvidia fell nearly 3%, Super Micro Computer fell more than 5%, and AMD fell more than 4%. Tesla rose nearly 4%.

$Tesla (TSLA.US)$Rising nearly 4%, Tesla has risen for four consecutive days. Wells Fargo & Co. has added Tesla to its strategic investment list.

$NVIDIA (NVDA.US)$Fell more than 3%, leading the collective decline of AI concepts.

$ASML Holding (ASML.US)$Slightly up, institutions predict that EUV lithography machine delivery volume will increase by more than 30% next year.

The largest e-commerce platform of pet-related products in the US.$Chewy (CHWY.US)$Rising nearly 5%, Keith Gill, the leader of retail investors, disclosed that he holds 6.6% of the company's passive equity.

Both Wuliangye and Luzhou Laojiao rose.$NIO Inc (NIO.US)$21209 new cars were delivered in June, a year-on-year increase of 98.1%.$Li Auto (LI.US)$47774 new cars were delivered in June, a year-on-year increase of 47%.$XPeng (XPEV.US)$10668 new cars were delivered in June, a year-on-year increase of 24%.

Editor/Emily