The Nasdaq and S&P 500 enjoyed gains on Wednesday after Tuesday’s earnings, while the Dow Jones slipped. Tesla Inc soared despite muted demand, while Boeing Co climbed despite a first-quarter loss. Alphabet Inc and Ford Motor Co were among other big names set to report on Wednesday. Tesla Inc emerged as one of Wednesday’s big risers, up 12.1% in pre-market trading after Tuesday’s earnings.
JPMorgan analysts have identified an attractive set-up for the S&P 500, based on their US Tactical Positioning Monitor, which triggered a level similar to late August and late October 2023 lows. Historically, when the indicator has reached this level, the US equity benchmark has gained approximately 3% within the following 20 days. The analysts anticipate the tactical bounce to continue, citing upcoming megacap tech earnings and PCE releases as key factors. They suggest that the market may overshoot to the upside if these releases are favorable, with tech and value stocks leading the surge, and artificial intelligence trades resuming.
Futures contracts for the S&P 500 and Nasdaq gained traction on Wednesday, buoyed by a resurgence in growth stocks. Investors cheered upbeat earnings from Tesla and eagerly anticipated economic data later this week that could provide insights into the Federal Reserve’s interest rate trajectory.
Tesla emerged as a standout, with a remarkable 9.9% pre-market jump in share prices following the electric vehicle manufacturer’s plans to introduce affordable models. Other electric vehicle stocks joined the rally, with Lucid Group, Nikola, and Nio witnessing gains ranging from 1.2% to 3.7%.
Other growth stocks experienced upward momentum, including Amazon.com, Microsoft, and Nvidia, which rose by 0.3% to 1.6%. Meta Platforms and Snap also made notable gains of 1.7% and 2.1%, respectively, following the US Senate’s approval of a bill that could potentially ban TikTok in the United States if its Chinese parent company, ByteDance, fails to divest the short video platform.
US equities appear to have rebounded from last week’s decline, which was attributed to geopolitical tensions in the Middle East and revised expectations for Federal Reserve rate cuts.
The corporate earnings season is gaining momentum, with analysts projecting a 6% annual growth in adjusted blended earnings for the quarter, according to LSEG data. Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, highlighted the significance of the substantial volume of company results this week, stating that it provides investors with a wider focus beyond macroeconomic events and contributes to the increased market activity.
Market participants are keenly awaiting the release of the Personal Consumption Expenditures (PCE) index for March, the Fed’s preferred inflation measure, on Friday, to gauge the likelihood of interest rate cuts this year. Money markets currently anticipate approximately 41 basis points of cuts in 2022, a downward revision from the 150 bps projected earlier this year, based on LSEG data.
The economic calendar for the day includes the release of durable goods data for March at 8:30 a.m. ET. Pre-market trading witnessed Visa soaring by 2.8% after the payment processing giant surpassed Wall Street estimates in its second-quarter results, indicating that consumers remain resilient despite concerns about economic slowdown. Texas Instruments also climbed 7.3% after the chipmaker’s positive second-quarter revenue forecast, suggesting growing demand for its analog semiconductors. Arm Holdings, Micron Technology, and Advanced Micro Devices also experienced gains, ranging from 1.4% to 3.6%, reflecting the positive sentiment surrounding chip stocks.
S&P 500 and Nasdaq futures surged on Wednesday, fueled by strong earnings from Tesla and anticipation of upcoming economic data. Megacap stocks led the rally, with Tesla soaring 9.9% premarket after announcing plans for affordable models. Other growth stocks, including Amazon, Microsoft, and Meta Platforms, also advanced significantly. The US Senate’s passage of a bill potentially banning TikTok contributed to gains in Meta and Snap. Corporate earnings season is in full swing, with Meta, Microsoft, and Alphabet among those slated to report this week. The Personal Consumption Expenditures (PCE) index, the Fed’s preferred inflation gauge, is expected to be released on Friday, providing insights into the central bank’s interest rate policy. Visa and Texas Instruments also reported strong results, boosting their stock prices. Chip stocks like Arm Holdings and Micron Technology also benefited from the positive sentiment.
The U.S. stock market made a strong start to 2024, with the S&P 500 index rising 10.6% in the first quarter. This marked the index’s best first-quarter performance since 2019. The rally was driven by expectations that the Federal Reserve would cut interest rates by March 2024, but those expectations have since been halved to possibly three cuts, with June now being the anticipated start date.
While the market has remained resilient, inflation has remained a concern, leading to a resetting of the benchmark 10-year U.S. Treasury yield from below 4% to 4.2% by the end of the quarter. Bonds enjoyed the decline in rates into the end of 2023, but the resetting of rate cut expectations has taken the broad bond market down -0.8% year-to-date.
Despite the challenges, cyclical stocks, led by the energy sector, surged in March, broadening the U.S. stock market beyond the seven dominant stocks that had led the rally. However, from a size standpoint, large caps remained the preferred choice, with mid and small caps lagging.
U.S. stocks traded higher towards the end of trading on Tuesday, with the S&P 500 gaining more than 1%, while the Dow and NASDAQ also rose. General Motors Company reported better-than-expected earnings for its fiscal first quarter, with quarterly sales growth of 7.6% year-on-year. Communication services and materials sectors were the leading and lagging sectors, respectively. In commodity news, oil traded up 1.8% while gold traded down 0.2%. European and Asian markets closed mostly higher, with the eurozone’s STOXX 600 rising 1.09% and Japan’s Nikkei 225 gaining 0.30%. Sales of new single-family houses jumped 8.8% in March, while the S&P Global services PMI and composite PMI fell to 50.9 and 50.9, respectively.
Healthcare stocks struggled in 2023, but a late-year rally helped the sector end the year in positive territory. Despite lagging behind tech and growth stocks, healthcare is expected to continue growing at a faster rate than the overall economy due to an aging population and rising healthcare spending. The integration of AI, defensive nature, and steady cash flow make healthcare stocks attractive for investors. Healthcare ETFs, such as S&P 500 Select Sector SPDR for Healthcare (XLV), have also shown strong performance. Astute investors are advised to consider healthcare mutual funds for portfolio diversification, with three recommended options being Janus Henderson Global Life Science (JNGLX), Vanguard Health Care (VGHCX), and Fidelity Select Pharmaceuticals Portfolio (FPHAX). These funds have strong Zacks Mutual Fund Ranks and positive annualized returns.
Super Micro Computer (SMCI) experienced a significant rebound on Tuesday, reversing a two-day sell-off that had reduced its valuation by over 20%. The AI server company’s shares surged by more than 7% during late morning trading, becoming the top gainer in the S&P 500. This rise came after Super Micro Computer’s announcement on Friday that it would release its fiscal third-quarter results on April 30. In previous quarters, the company has provided pre-announced results, including an 11-day advance notice of its earnings call in January. Analysts generally predict a quarterly revenue of $3.92 billion and an earnings per share of $5.72. Last week, Loop Capital set a $1,500 price target for the stock, emphasizing the company’s dominance in generative AI servers and its growing advantage over competitors. The rebound in AI stocks, including Super Micro Computer, comes after a challenging Friday trading session. Fears surrounding Super Micro Computer and AI drove down semiconductor stocks.
S&P 500 futures are edging closer to yesterday’s highs in pre-market trading, with a gain of 20 points or 0.4%. This upward momentum is fueled by positive earnings reports, particularly from GM, whose shares have surged 6% after exceeding expectations and raising guidance on the back of strong truck sales. Spotify’s shares have also witnessed an 8% increase due to impressive earnings. However, UPS, Pepsi, JetBlue, Nucor, and Cleveland-Cliffs have reported earnings misses or declines in demand, resulting in lower share prices.
Wall Street is preparing for a busy day in the markets with the release of numerous corporate earnings reports from key players. Futures for the Dow Jones Industrial Average and S&P 500 have opened with slight upticks. General Motors reported strong first-quarter results, boosting its stock price. PepsiCo shares remain flat despite exceeding revenue expectations, while JetBlue faces a drop after disappointing sales and a lowered revenue outlook. Tesla, which has experienced a significant stock decline this year, is set to release its financial results after the market closes. The Federal Reserve’s recent statements have reined in expectations of interest rate cuts, putting pressure on companies to deliver solid profits and revenue growth.
