- Tom Lee tells us that the market has everything it needs to surge «Face-melting».
- It points to four specific factors driving this move.
- But one strategist is not sure that the rally has strong legs.
Tom Lee, head of research at Fundstrat, says the market is ready for a «Face-melting» rally through the end of the month. He identified four specific components behind these expectations.
CNBC contributor Dan... joined Jay Woods of Freedom Capital Markets as major indexes were recovering from last week’s selloff. The two agreed that technology shares are leading the rebound, though they differ on how lasting it will be.
### Four components behind the bullish call
Before his famous remark about a “face-ripping rally,” he pointed to four specific factors:
- Soothing oil prices over the weekend
- Treasury yields fall alongside oil
- A hawkish Federal Reserve may soften its stance
- Conditions over a broader market have become oversold
He told me that these four conditions together make for a rally with real momentum.
### The Fed and oil give the market room to breathe
He explained that last week featured the worst pain, driven by a hawkish Fed and high energy prices.
But oil has since cooled, followed by a drop in Treasury yields, easing pressure on risky assets.
This relief comes after the Fed raised interest rates the previous week. The move had rattled traders when it failed to spark broader selling.
He believes the central bank may now soften its tone, given shifting inflation inputs such as transport and energy costs.
> “I think all the ingredients are in place for a face-ripping rally, especially given how oversold we are.”
> — Tom Lee on CNBC
### Chip stocks lead… but Woods wants broader confirmation
This rally is being driven by stocks tied to artificial intelligence, including AMD.
AMD’s arrival at a trillion-dollar valuation reflects investors’ appetite for this trade. Woods calls it a “provocation” between bulls and bears at the 7,600 level on the S&P 500.
Woods warned that energy prices fell for just one session, and that little has changed meaningfully.
He expects chip and software strength to push the S&P 500 toward its prior peak near 7,800. But he doubts technology alone can reach new highs without confirmation from next week’s Micron earnings results.
He replied that sentiment is still bearish under the surface. AI stocks are still trading below June highs, and investors have dialed back risk ahead of the Fed decision.
He reaffirmed his S&P 500 target of 8,000 this month, saying that the rally in digital currencies in August often precedes stock moves by about a month.
The continuation of the rally may depend on next week’s earnings. Micron’s report will show whether chipmakers can extend their gains or whether the rebound will remain narrow.@Binance Square Official