Stocks rose broadly in July, with the Nasdaq rebounding from previous lows. Wall Street is arguing over whether the markets have bottomed yet. Growth stocks such as technology have broadly fallen this year on the back of monetary tightening, recession and other risks. Morgan Stanley warned in its August 3 report that while the Nasdaq has rebounded 16% since June 16, investors should not get ahead of themselves. “This is not the bottom of the market, things are not going to constantly pick up from here because we will be buying fewer tech products for a while, so everyone has fewer units to make as post-COVID = pre-COVID demand,” the bank’s analysts wrote. They added: “Reality check – unlike ‘big tech’, companies relevant to consumer appreciation provide more cautious guidance.” Morgan Stanley listed some examples: Sony’s disappointment with guidance, Microsoft and Apple slowing hiring. In addition, Microsoft said that small and medium-sized companies are spending less on information technology and warned of a deterioration in the PC market in June, the investment bank noted. Morgan Stanley said the “outsider” is Apple. Consumption in China has also fallen, thanks to the effects of the Covid lockdowns, according to Morgan Stanley. This slowdown will hit the e-commerce and consumer appreciation sectors, she said. The reason stocks are rebounding The bank said stocks are now rebounding for a number of reasons – inflation expectations have eased due to lower commodity prices, and a marked slowdown in interest rate hikes means less pressure on tech stocks. She added that earnings were “weak, but not as bad as feared”. US stocks mostly continued to rise this week. The Nasdaq is up 2.7% so far, while the S&P 500 hit its highest level since June on Wednesday, up 0.5% so far for the week. But Morgan Stanley issued a cautionary note about the future. Read more Asset Manager Predicts the Next Bull Market – Reveals How to Set It Up Here’s How to Invest in Returns to Beat a Bad Year for Stocks and Bonds – According to the Pros Market Bottomed? Here’s what Wall Street has to say after the US stock market rebound in July “Earnings won’t go up – the problem isn’t this earnings season (that looks lagging) but we’re on the wrong side of the earnings cycle next earnings season and the next,” analysts said, Where we’ll see cuts, pressure on the top streak, and mean rebounds in the margins.” Morgan Stanley said Samsung is one technology stock that can weather the “storm”. It says the company has an “enormous range of resources” yet to monetize, and has seen its valuation drop by a “most significant” level since late 2018. Morgan Stanley gave the stock a KRW 70,000 ($53) price target, an increase of 14 % Approximately. The bank said it likes companies that have the potential to continually grow better than their peers, and cited chip makers TSMC and Alchip as such examples. Morgan Stanley gave TSMC a price target of NT$780, up around 55%. Alchip also gave a target price of NT$1,420, an increase of more than 120%. Morgan Stanley said it would sell parts of the technology such as cloud semiconductors and capital equipment to Japanese semiconductors.
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