Here are the 10 things we're watching in the stock market Friday

The S&P 500 reached new highs this week, driven by economic data that has led Morgan Stanley to forecast four consecutive 25 basis point Fed rate cuts starting in September and extending through January 2026. In corporate news, Adobe reported strong earnings and raised guidance, while luxury retailer RH saw its shares drop over 9.5% after lowering its full-year revenue outlook. Additionally, Nvidia and OpenAI are expected to announce multi-billion dollar data center investments in the UK, highlighting continued AI infrastructure expansion, even as Applied Materials faced a downgrade due to China competition risks.

Analysis

The market is exhibiting strength, with the S&P 500 reaching new highs, largely propelled by a significant dovish pivot in monetary policy expectations. Morgan Stanley has doubled down on its rate cut forecast, now anticipating four consecutive 25 basis point cuts from the Federal Reserve starting in September. This macroeconomic tailwind is creating clear divergence at the sector and company level. The technology sector, particularly in software and AI, shows robust momentum. Adobe (ADBE) posted a significant beat-and-raise, with revenue of $5.99 billion and adjusted EPS of $5.31 surpassing estimates, causing its shares to rise. The AI infrastructure buildout continues unabated, evidenced by Nvidia (NVDA) and OpenAI's planned multi-billion dollar data center investments in the UK and Super Micro Computer's (SMCI) volume shipments of new Blackwell hardware. However, pockets of weakness exist even within tech, as Applied Materials (AMAT) was downgraded by Mizuho on China competition concerns, which simultaneously reiterated a preference for Lam Research (LRCX). In contrast, consumer-facing sectors are showing signs of strain. Luxury retailer RH saw its stock fall over 9.5% after lowering its full-year revenue growth outlook to 9%-11% from 10%-13% previously. Similarly, Barclays downgraded both Constellation Brands (STZ) and Molson Coors (TAP) on concerns over weakening beer trends. Event-driven situations are also creating significant price action; Warner Bros. Discovery (WBD) surged on M&A reports, while Boeing (BA) shares dropped on 777x certification delay news, though JPMorgan views this dip as a buying opportunity, maintaining its $251 price target.

Key Decisions for Investors

• Given the dovish Fed outlook and demonstrated earnings power, consider maintaining or increasing exposure to technology leaders like Adobe (ADBE) and key AI infrastructure players such as Nvidia (NVDA).
• Exercise caution with consumer-facing stocks, as the guidance cut from RH and downgrades of Constellation Brands (STZ) and Molson Coors (TAP) signal potential demand deterioration in both discretionary and staple segments.
• Monitor event-driven situations for alpha opportunities, such as the M&A catalyst for Warner Bros. Discovery (WBD) and the potential long-term entry point in Boeing (BA) for investors who agree with the analyst view that current issues are temporary.
• Be selective within the semiconductor equipment space; the downgrade of Applied Materials (AMAT) due to competitive risks contrasts with the positive outlook for Lam Research (LRCX), highlighting the need for nuanced sub-sector analysis.