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Big Tech, Mag 7 fueling market rally, not tariff hopes: Morgan Stanley

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Morgan Stanley's CIO Mike Wilson sees beaten-up Mag 7 stocks playing key role in market rebound

Morgan Stanley’s Mike Wilson sees a meaningful rotation back into U.S. stocks, and he sees one beaten-up group as a winner.

“It started out with a low-quality rally, which is what we expect – meaning a short squeeze,” the firm’s chief investment officer told CNBC’s “Fast Money” on Monday. “Then, what we noticed is the revision factors on the Mag Seven are actually starting to stabilize a bit. So, the last couple of days though stocks have acted better, and that can take the index higher. How high? 5,900. So, we’re almost there.”

The major indexes had a notable start to the week. The S&P 500 gained roughly 1.8% and closed at 5,767.57 — about 6% below its all-time high. Meanwhile, the Dow jumped almost 600 points while the Nasdaq Composite surged more than 2%.

The “Magnificent Seven” had a big role in Monday’s rally. Its members include Apple, Nvidia, Meta Platforms, Amazon, Alphabet, Microsoft and Tesla. The electric vehicle maker registered its best daily performance since November.

But Wilson, who’s also the firm’s chief U.S. equity strategist, suggests a narrow window for gains. He focused his Monday research note on the idea.

“Stronger seasonals, lower rates and oversold momentum indicators support our call for a tradeable rally from ~5500,” he wrote. “A weaker dollar and stabilizing Mag 7 EPS [earnings per share] revisions can drive capital back to the US. Beyond the tactical rally, volatility will likely persist this year.”

And, he won’t rule out new lows for the year.

“Whatever rally we’re getting now, we think probably end up fading into earnings, into May and June,” he added. “Then, we’ll probably make a more durable low later in the year.”

According to Wilson, the market weakness is mostly tied to fundamentals and technicals.

‘Nothing to do with tariffs’

“The reason the markets are lower over the course of the last three or four months has nothing to do with tariffs,” said Wilson. “It’s mostly to do with the fact that earnings revisions have rolled over. The Fed stopped cutting rates. You had stricter enforcement on immigration. You have [Department of Government Efficiency]. All of those things are growth negative.”

Wilson’s S&P 500 year-end target is 6,500, which implies a nearly 13% gain from Monday’s close.

“Could we make a new high in the second half of the year as people look forward to 2026? Yeah,” Wilson said.

Join us for the ultimate, exclusive, in-person, interactive event with Melissa Lee and the traders for “Fast Money” Live at the Nasdaq MarketSite in Times Square on Thursday, June 5th.

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AI drives growth for a few Chinese companies. Analysts share picks

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What the Trump tax bill means for your wallet

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President Donald Trump’s “big, beautiful bill” cleared the House and is making its way through the Senate. 

Still, critics point out the bill, which is over 1,000 pages, will add trillions to what is already ballooning government debt hovering at $36 trillion and deficits. However, U.S. Treasury Secretary Scott Bessent believes this can be managed. 

“We think that we can both grow the economy and control the debt. What’s important, Bill, is that we grow the economy faster than the debt. What I would tell your viewers to focus on, what I am focused on, what Secretary Yellen was focused on is what is the total debt to GDP because we can grow our way out of this,” Bessent said during an appearance Friday on Fox’s “America’s Newsroom” with Bill Hemmer. 

NATIONAL DEBT TRACKER: AMERICAN TAXPAYERS (YOU) ARE NOW ON THE HOOK FOR $36,214,475,432,210

Still, the bill contains several provisions that will benefit American workers and everyday households. FOX Business explains how your money may be affected. 

NO TAX ON TIPS

Hardworking Americans won’t have to pay taxes on the tips they make. While this is good for service employees, it may mean lost revenue for the government…continue reading here

No tax on tips

A tip jar on the counter at a coffee shop. (iStock / iStock)

401(k) FOR BABIES & CHILD TAX CREDITS

Typically, you start a 401(k) when you begin working, getting matched contributions from your employer. The bill may expand similar investment vehicles to newborns and other child tax credits…continue reading here.

trump tax bill, child tax credit

Little girl sleeping (iStock / iStock)

SALT

High-tax blue states, such as New York, likely secured a win with a big bump for SALT, a deduction for state and local taxes, previously capped at $10,000…continue reading here

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SALT deduction to rise

The Midtown Manhattan skyline in New York City April 8, 2024. (Charly Triballeau/AFP via Getty Images / Getty Images)

AUTO LOANS INTEREST FREE  

If you own or buy a car made in the U.S. using an auto loan, the interest is on track to be eligible for a deduction…continue reading here.

no tax on auto loan interest

Vehicles for sale at an AutoNation Honda dealership in Fremont, Calif., June 24, 2024. (David Paul Morris/Bloomberg via Getty Images / Getty Images)

MEDICAID SAFE? 

Trump made it clear the Medicaid program, which provides basically free health insurance to Americans who meet income requirements, won’t be gutted. Not everyone is convinced…continue reading here

Medicaid changes, Trump tax bill

FOOD STAMPS

Changes to food stamps and nutrition assistance, formerly known as SNAP, or the Supplemental Nutrition Assistance Program, are part of the tax bill. Here’s what may change…continue reading here

"SNAP/EBT Food Stamp Benefits Accepted" is displayed on a screen

A SNAP sign is displayed on a screen inside a Family Dollar store in Chicago March 3, 2020. (Daniel Acker/Bloomberg via Getty Images / Getty Images)

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Stocks making the biggest moves midday: AAPL, ROST, INTU, BAH

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