How long will this wave of gains last?

On May 1st, the Federal Reserve's (Fed) interest rate outlook was better than market expectations, and Qualcomm's strong financial report spurred technology stocks. On the eve of the release of the key employment report, the four major U.S. stock indices closed higher across the board on the 2nd.

The Dow Jones Industrial Average closed up 0.85% (322.37 points) at 38,225.66 on May 2nd. The Nasdaq Composite Index rose by 1.51% (235.48 points) to 15,840.96. The S&P 500 stock index increased by 0.91% (45.81 points) to 5,064.20. The Philadelphia Semiconductor Index climbed by 2.17% (97.67 points) to 4,605.35.

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LSEG data indicates that the peak of the first quarter's super earnings week has passed, with 373 of the S&P 500 constituents having reported their earnings. Among them, 77% of the earnings reports have beaten Wall Street's initial expectations.

Qualcomm announced after the market closed on the 1st that its second quarter (January-March) core earnings per share reached $2.44, beating analysts' previous estimates of $2.32, with revenue also exceeding expectations, mainly driven by strong demand for advanced chips in smartphones. Upon hearing the news, Qualcomm's stock price jumped 9.74% to close at $180.10, setting a new high since February 9, 2022, and leading the 30-component Philadelphia Semiconductor Index in gains. Nvidia also rose sharply by 3.34% to close at $858.17. TSMC's ADR increased by 0.96% to close at $136.23.

Apple, which was set to report its earnings after the market closed, ended the day up 2.2% at $173.03. After the market closed on the 2nd, Apple reported second-quarter earnings per share that beat analyst expectations and announced that the board of directors had authorized a record-breaking $110 billion share buyback plan (a 22% increase year-over-year), causing the stock price to surge by more than 6% in after-hours trading. However, iPhone sales during Q2 decreased by 10% year-over-year, mainly due to a high base period last year.

Apple's power amplifier (PA) supplier, Qorvo, saw its stock price plummet 14.5% to $95.67, leading the 30-component Philadelphia Semiconductor Index in losses, due to the off-season effect of iPhone shipments and a lackluster financial forecast.

Other significant stocks saw the following movements: Microsoft rose by 0.7%, META increased by 0.5%, Amazon climbed by 3.2%, and Google gained 1.7%. Server giant Super Micro rebounded by 3.2%, AMD also rebounded by 1.3%, semiconductor heavyweight Broadcom fell slightly by 0.3% against the trend, memory giant Micron rose by 2.4%, Tesla remained flat, AI PC's two U.S. benchmark stocks Intel inched up by 0.4%, and Dell rebounded by 3.8%.The FED's interest rate decision meeting has concluded, with the interest rate remaining unchanged. However, a statement by Powell that there will be no rate hikes has been interpreted as hawkish with a dovish undertone. Looking at the U.S. stock market, all four major indices have broken through their quarterly lines. Moreover, the U.S. stock market closed on Tuesday with a monthly line for April, showing a red close after five consecutive reds. From a practical perspective of candlestick analysis, the probability of the U.S. stock market closing in the red again in May is high. Currently, we are waiting for Apple's earnings report early today. Although the stock price surged after the market closed, it is still necessary to observe the trend in the regular trading session to make a determination. From the above discussion on technical analysis, the stock price reflected by Apple's earnings report can only surge. Even a small increase or decrease will not be able to drive the current downtrend of the U.S. stock market at the quarterly line.

Federal Reserve Chairman Jerome Powell largely ruled out the possibility of a rate hike at the next policy meeting on the 1st, alleviating concerns that stubborn inflation is out of control. However, he also hinted that the progress in cooling inflation is disappointing, and it may be necessary to extend the time for maintaining high interest rates.

The Federal Open Market Committee (FOMC) also announced on the 1st that it will slow down the pace of reducing the balance sheet (also known as quantitative tightening monetary policy, QT). The monthly cap on the amount of principal that will no longer be reinvested after the maturity of Treasury bonds will be significantly reduced from the original $60 billion to $25 billion to avoid unnecessary pressure on the financial market. The cap on the principal that will no longer be reinvested after the maturity of mortgage-backed securities (MBS) remains unchanged at $35 billion.

The Hang Seng Technology Index soars by more than 4%

Hong Kong stocks achieved an auspicious start on the first trading day of May, with all three major indices turning red, showing considerable gains. The Hang Seng Index closed up 2.5% at 18,207.13 points, marking an 8-day winning streak. The Hang Seng Technology Index rose 4.45% to 3,865.48 points, and the Hang Seng China Enterprises Index increased by 2.6% to 6,437.09 points. The transaction volume exceeded 11 billion Hong Kong dollars. Southbound capital net bought 3.249 billion Hong Kong dollars.

In terms of individual stocks, SenseTime surged by 36%, NIO rose by more than 20%, and Kingdee International, Alibaba Health, and JD Health saw gains exceeding 10%.

From the perspective of the market, most of the Wind concept indices rose. The online medical index increased by 9.8%, the automobile dealer index rose by 8.53%, and the SaaS index climbed by 8.05%. In terms of industries, pharmaceutical biotechnology and life sciences, retail, automobiles and auto parts, software and services, and real estate led the gains.

Cathay International Strategy Analyst Yan Zhaojun stated that considering the positive improvements in both the capital and sentiment aspects, Hong Kong stocks are expected to move up from the previous 16,500 points to around 17,200 points. Strategically, one can lay out positions when the market is low.

Driven by the influx of foreign capital into Hong Kong's AI large model stocks, as well as the optimistic judgment of foreign investors observing China's economic recovery during the May Day period, the Hong Kong Hang Seng Technology Index soared by more than 4%, leading the core AI sector to take off.Although AI mega models have been hyped in the A-share and US stock markets for a year, Hong Kong stocks of AI mega models have been shunned by many public fund managers over the past year. During the period of fervent speculation in AI mega models in A-shares and US stocks, many fund managers who missed the market went south to Hong Kong to explore "cheaper and more authentic artificial intelligence." However, contrary to expectations, Hong Kong stocks not only remained indifferent to the global craze for AI mega models but also experienced a rare deep plunge, causing many public funds that ventured south to search for authentic targets to be severely impacted in 2023 and the first quarter of 2024.

Now, as the AI mega model speculation in A-shares and US stocks comes to an end, global capital, including A-share funds, QDII funds, and foreign sovereign funds, is beginning to flow into Hong Kong stocks, especially technology stocks, at an accelerated pace. The Hong Kong-listed technology stocks that were heavily reduced and underweighted by public funds rose across the board on Thursday, proving that institutional funds are making a strong comeback.