The first half of 2024 on Wall Street has been characterized by significant gains across the board. All three major indexes – the S & P 500, the Dow Jones Industrial Average, and the Nasdaq Composite – are set to end the first half with positive returns. The S & P 500 has seen a 15% increase, while the Dow Jones Industrial Average has gone up by 5%. The Nasdaq Composite, on the other hand, has outperformed both with a gain of 20%.
One of the key drivers of the market gains has been the continued growth of artificial intelligence (AI) technology. Companies like Nvidia have seen significant increases in their market valuations, with Nvidia briefly surpassing Microsoft in terms of market cap earlier in the year. Microsoft itself has benefited from the AI trend, particularly with the rollout of Copilot. However, there are concerns that some of these stocks may be overbought and could be due for a pullback.
CNBC Pro recently conducted a screening of the S & P 500 to identify overbought stocks based on their 14-day relative strength index (RSI). An RSI above 70 indicates that a stock is overbought, potentially signaling a downturn in the near future. Companies like Microsoft, Eli Lilly, and FedEx have all shown signs of being overbought, with RSI readings of 74, 83, and 77 respectively.
On the other end of the spectrum, there are stocks that have entered oversold territory, indicating that they could be due for a rebound. Walgreens Boots Alliance and Waters Corporation are among the oversold names, with RSI readings of 20 and 22 respectively. Walgreens, in particular, has faced challenges in the macroeconomic environment, leading to a decrease in its full-year profit forecast.
Overall, investor sentiment seems to be mixed with some stocks being viewed as overbought and others as oversold. Analysts are cautious about stocks like Walgreens, with only 62% of those polled rating it as a hold. However, the average price target implies a significant upside potential of more than 43%.
As Wall Street wraps up a strong first half in 2024, investors are faced with a market that is showing signs of both strength and weakness. The continued rise of artificial intelligence technology has driven market gains, but there are concerns about certain stocks being overbought. It will be important for investors to closely monitor these trends and adjust their portfolios accordingly to navigate the second half of the year.