As we close the first half of the year, Wall Street has seen significant gains across all major indexes. With the S&P 500 up 15%, the Dow Jones Industrial Average up 5%, and the Nasdaq Composite boasting a 20% gain, investors have been riding high on the artificial intelligence boom. Companies like Nvidia have led the way, pushing market valuations to new heights. However, with concerns about market breadth and an economic slowdown looming, some stocks may be due for a pullback.
A recent CNBC Pro screening of the S&P 500 revealed several overbought stocks, signaling potential downturns in the near term. Microsoft, the world’s most valuable company, has seen its stock surge nearly 21% this year. However, with a 14-day RSI reading of 74, it is among the most overbought stocks on Wall Street. The European Union’s antitrust allegations against Microsoft and the company’s exhaustion signals may be warning signs of a looming pullback.
Eli Lilly is another overbought stock, with a 14-day RSI of 83. The drug manufacturer has seen a 57% climb this year, largely driven by the popularity of GLP-1 drugs. Similarly, FedEx has an RSI of 77, with a 19% increase in share value in 2024. While the company has exceeded Wall Street’s expectations, cost-cutting efforts may not be sustainable in the long run, raising concerns about its future performance.
On the flip side, some stocks have entered oversold territory, indicating a potential rebound. Walgreens Boots Alliance and Waters Corporation are among the oversold names, with 14-day RSI readings of 20 and 22, respectively. Walgreens, in particular, has faced challenges in its fiscal performance, prompting a trim in its profit forecast. However, analysts remain cautiously optimistic, suggesting a potential upside of over 43% for the stock.
As we navigate the second half of the year, it’s essential for investors to remain vigilant and adaptable to the changing landscape of the stock market. While the artificial intelligence boom has driven significant gains for many companies, signs of exhaustion and overbought conditions may indicate an impending pullback. Conversely, oversold stocks present opportunities for a potential rebound in the near future.
The stock market is a volatile and unpredictable entity, influenced by a myriad of factors both internal and external. As we move forward, it is crucial for investors to stay informed, conduct thorough research, and make informed decisions to navigate the rollercoaster ride that is the stock market.