Daily Stock Market Articles

Most Bullish Day of Year! 1st Day July S&P 500 Up 14 Straight

July’s first trading day is the third best performing first trading day of all twelve months with DJIA gaining a cumulative 1729.68 points since 1998. Over the past 21 years, DJIA’s first trading day of July has produced gains 81.0% of the time with an average advance of 0.35%.

S&P 500 has advanced 90.5% of the time (average gain 0.44%) since 2004 and has been up 14 straight years in a row on the first trading day of July. NASDAQ has been similarly bullish advancing 85.7% of the time (0.50% average gain).

No other day of the year exhibits this amount of across-the-board strength, which supports the case for declaring the first trading day of July the most consistently bullish day of the year over the past 21 years. Although, the third from last day of August is rising to challenge for this title.

 

Bullish Before July 4th, Bearish After

Trading the three days ahead of the July 4th Independence Day holiday has historically been stronger than the days after the holiday. Trading on the day before and after the holiday is often lackluster. Volume tends to decline on either side of the holiday as vacations begin early and/or finish late. Since 1980, DJIA, S&P 500, NASDAQ and Russell 2000 have recorded net losses on the day after.

This has become more pronounced in recent years and was the case again last year. However, over the past thirteen years since 2011, trading after Independence Day has softened notably. DJIA has declined ten times in 14 years on the day after. S&P 500 has slipped eight times. Average performance remains fractionally positive. NASDAQ and Russell 2000 have more up days after the 4th but R2K averages losses the two days after the 4th.

 

The Energy Behind Artificial Intelligence


The emergence of Artificial Intelligence (“AI”) has triggered one of the largest growth spurts in US electricity demand in decades. Early indicators show some impacts of this already as grid electricity prices are increasing, signaling that electricity demand is growing faster than supply. While the underlying technologies powering AI systems are expected to become significantly more energy-efficient over time, the sheer scale and pace of AI adoption suggest that overall electricity generation will need to increase. New reports suggest that traditional forms of electricity, such as fossil fuels and renewables, may play a larger role in meeting this demand than frontier sources of electricity such as nuclear.

Electricity Prices Rise
My colleague Sonu Varghese, VP, Global Macro Strategy, has highlighted the persistent inflation in electricity prices. Shown below, the annual rate of electricity price increases has recently hovered between 2% and 5%—a marked rise from the pre-pandemic range of flat to 2%. This sustained elevation is one of the clearest indicators that electricity demand is growing faster than supply.



The emergence of AI is certainly a part of the growth of energy demand. Offsetting this though is the fact that AI’s main systems have shown a history of becoming more efficient over time. Although the introduction of AI caused a large step-function change in energy demand, more efficient systems may provide downward pressure on electricity demand growth over time.

Nvidia’s Exponential Efficiency Gains
Technological progress, particularly in semiconductor development, continues to drive improvements in energy efficiency. Nvidia’s latest generation of chips, known as ‘Blackwell,’ deliver nearly 40x more token output than their previous generation, referred to as ‘Data Center Productivity’ in the table below. I wrote about this breakthrough recently and it reflects a broader phenomenon: as AI usage increases, the output-per-watt from data centers is also rising sharply. Put simply, today’s AI is likely to be the least energy efficient version we’ll ever use.



Still, More Energy Will Be Needed
Even when accounting for these efficiency gains, electricity demand is expected to grow. Estimates of the growth rate vary widely, but a recent report from RMI1 estimates the US will need to grow its electricity generation by a total of 18% over the next decade, or about 1.6% annually. In my view, that’s both a rationally sound estimate and a feasible undertaking.

Initial signs point to combined cycle gas-turbines as early beneficiaries of this demand, and there’s a potential for ‘renewables plus storage’ systems to gain share. Lazard’s 2025 Levelized Cost of Energy (“LCOE”)2 report shows gas turbines offering the lowest overall cost of generation. Turbine manufacturers, such as GE Vernova, have been early winners of this demand for electricity generation. As shown in the chart below, GE Vernova’s equipment revenue backlog has grown nearly 29% over the past two years and speaks to the influx of orders the company has received to meet this demand.



Solar and wind when paired with storage are a close second choice as the cost of these systems decline. Lazard’s report went on to show that the per-watt cost for utility-scale solar deployments decreased 4% year over year, which was the steepest decline in costs amongst the generation sources researched2. Solar panel manufacturers, such as First Solar, have iterated panel designs and technology to better harness this source of energy. These cost reductions, paired with the greater need for electricity, have allowed First Solar to increase sales by nearly 45% over the last three years. Analysts polled by FactSet expect even stronger growth with current estimates showing First Solar may grow revenue another 60% over the next three years (data as of 6/26/2025).



The growth in electricity demand is largely being met by more traditional forms of energy generation as well as renewables plus storage where viable. More frontier forms of energy generation, such as nuclear, remain a questionable opportunity.

Recent U.S. nuclear project histories raise serious concerns amidst cost and time overruns. NuScale in 2015 attempted to develop a 720 megawatt small module reactor (“SMR”) and estimated costs to be roughly $3.1 billion3. In 2021, the company re-estimated that costs would be closer to $9.3 billion (a 3x overrun) and the project was scrapped3. Separately, the Municipal Electric Authority of Georgia did successfully bring online their Plant Vogtle recently. However, total costs were nearly $34 billion as compared to $14 billion initially expected and the units entered service seven years later than expected4.

These anecdotes aren’t to say nuclear generation is impossible given the current landscape but should illustrate the conundrum facing electricity seekers. Utility owners face a tradeoff between nuclear projects potentially incurring unexpected deviations that lead to higher costs over the lifetime of the plant or sticking with more proven sources that deliver modest outcomes. There’s unlikely to be a perfect solution, but more conventional forms of electricity have seen the most success so far.

AI services continue to proliferate in our lives. The impact of these services is already being felt as grid electricity prices rise, at least due in part to this. While today’s AI is likely to be the most power-hungry form we ever use, the net load growth of roughly 1.6% annually will need to be met. Proven forms of electricity, such as gas and renewables, are currently the most viable paths forward. Meanwhile, nuclear remains full of potential but burdened by uncertainty and delays. Perhaps AI itself can deliver breakthroughs in this area. For now, AI looks like it will be powered by more stable sources.

 

Should We Expect Fireworks in July?


“The greatest danger for most of us is not that our aim is too high and we miss it, but that it is too low and we reach it.” Michelangelo

What a wild ride 2025 has been and it is only halfway over! After being down nearly 20% at the lows in April, stocks have staged one of the largest reversals ever and on Friday moved back to new highs for the first time since February 19.

We’ve been pounding the table since late April that a big rally was likely, but even we’ve been surprised at how quickly new highs are here, but we aren’t complaining. Many have what we call a fear of heights when it comes to new highs. New highs are one of those things that might seem scary but aren’t nearly as scary in reality. Kind of like getting blood drawn. I hate it and get all worked up, then it is quickly over and I wonder why I was so worried.

Friday marked the 1,245th new all-time high for the S&P 500 since 1957 (when it became 500 stocks). This means there’s a new high about 7.2% of all days or once every 14 trading days. That is pretty much a new high every three weeks, give or take, and they tend to come in rough clusters that can last years or even decades.

In other words, there are always worries out there and reasons to be fearful, but new highs just aren’t one of them. As we show below, new highs happen way more than you probably realize and they are perfectly normal. Yes, someday we will see a major peak in stocks and it’ll be the last new high for a long while, but the good news is we don’t think that day is today.



Historically, July Is a Strong Month
After gaining nearly 6% in May, for the best May since 1990, the S&P 500 is following it up with a very solid June (with one day to go the index is up more than 4%). The good news is July tends to be a very strong month for stocks and we don’t think this year will be any different, as this surprise summer rally continues.

In fact, July is the very best month of the year in a post-election year, the second best the past 10 years, and again the best over the past 20 years.



Adding to the fun, July has been higher an incredible 10 years in a row, only one away from tying the longest July win streak ever from the ‘40s and ‘50s.



What About the Rest of the Year?
What caught our attention is the month of June historically hasn’t been very strong, but neither has May for that matter. So what has happened when both of these historically weak months are in the green (like 2025)? The answer is good things for the bulls.

July actually does better when May and June are higher, but it is the final six months that really stand out, as these months have finished higher an incredible 15 out of the past 16 times and up nearly 9% on average (in half a year). The bottom line, we see reasons to expect this bull market to continue and the strength the last two months only further confirms this.



Thank you for reading and we want to wish everyone a happy and safe July 4th holiday week!

 

Technology Earnings Preview


Technology stocks came roaring back in the second quarter of 2025. With stock prices now elevated, investors are setting a high bar for companies to clear in the upcoming earnings season. Unlike last earnings season – marred by fresh uncertainty stemming from newly announced tariffs – investors may be swifter to punish companies that fail to provide forward-looking guidance, as perceived uncertainty has been reduced. Encouragingly, the data tells a supportive story: last year’s AI-related spending may be evolving into AI-driven profits.

The technology sector, as proxied by XLK (the iShares Technology Select Sector Fund), has historically delivered earnings per share (“EPS”) growth that outpaces the broader S&P 500, tracked by SPY. As shown below, EPS growth outperformance for XLK peaked in the fourth quarter of 2023, when tech earnings grew 21.3% year over year compared to 3.7% for the S&P 500 – a notable 17.6% outperformance (FactSet data). Recent performance shows more in-line performance, with tech earnings largely growing at the same rate as the broader market for the last four quarters.



Forward estimates a potential breakout for tech fundamentals. For the coming earnings season, the tech sector is expected to outgrow the broader market by an impressive 12.9%. If achieved, this would mark the largest outperformance since the first quarter of 2024 and could signal a narrative shift. Specifically, tech companies that ramped up operating expenses over the past five quarters to accelerate AI product development (which reduced earnings) may now be positioned to convert those investments into accelerating earnings growth.

The market isn’t waiting for confirmation. Tech stocks are approaching relative highs compared to the SPY even before the reports begin. XLK outperformed SPY by a strong 11% during the calendar second quarter according to FactSet data. As shown below, this outperformance brings the XLK-to-SPY price ratio within striking distance of its all-time high set in July 2024. Said differently, tech stocks are nearly the most loved they’ve ever been relative to the broader market.



The chart also shows an important relationship between earnings outperformance and price outperformance – price performance of XLK to SPY often reflects relative earnings growth performance in advance. Tech’s strong run in 2023, which saw repeated new highs in this ratio, was underpinned by robust fundamentals. With tech earnings expected to outpace the broader market for the rest of the year, active investors may want to consider where this chart could be heading next.

As uncertainty has waned in the market over the last 3 months, investors will be looking for strong earnings reports this coming season. Tech earnings have largely grown in line with the S&P 500 over the last five quarters, but are expected to robustly outgrow the index this quarter. Investors have already bid up tech stocks in anticipation of this, but there could be confidence still to be gained. Clear, forward-looking commentary and guidance that supports elevated earnings expectations could give investors renewed confidence in the tech sector this earnings season.