Investors Diversify as Earnings Week Begins
Investors are showing increasing interest in sectors outside technology, resulting in a climb for Wall Street's main indexes. This uptick is taking place amidst a critical week filled with major companies' earnings reports and a Federal Reserve meeting.
Tech Giants' Earnings Reports to Justify High Valuations
Key players in the tech industry, Microsoft, Google-owner Alphabet, and Meta Platforms, will be under scrutiny this week. Their earnings will potentially reveal whether their stocks can justify the high valuations currently attached to them.
Nasdaq Composite Index's Impressive Rally Amid Market Optimism
Despite the broader market focus, the tech-heavy Nasdaq Composite Index has seen an impressive 34% rally this year. This has been driven by optimism surrounding an end to the Federal Reserve's tightening cycle, particularly among rate-sensitive mega-cap growth companies, and advances in artificial intelligence.
Market Diversification Benefits Non-Tech Stocks
Investors have started seeking bargains in non-tech stocks, causing the Nasdaq to trail other major indexes. According to Randy Frederick, managing director of trading and derivatives at the Schwab Center for Financial Research, the current trend indicates investors diversifying their portfolios and seeking potentially better deals in other market sectors.
Chevron's Upbeat Earnings Propel Dow's Winning Streak
Chevron's recent 2.73% gain, following its positive preliminary quarterly earnings report, has contributed to the Dow's longest winning streak in over six years. In contrast, second-quarter earnings, in general, are expected to drop by 7.9% as per Refinitiv data.
Potential End to Federal Reserve's Tightening Cycle
The Federal Reserve is predicted to raise interest rates by 25 basis points at its policy-making meeting on Wednesday. The majority of economists, based on a Reuters poll, anticipate this to be the final hike in the current tightening cycle, following data that suggested signs of disinflation.
Wall Street's Major Indexes Score Gains
The Dow Jones Industrial Average, the S&P 500, and the Nasdaq Composite all posted gains, increasing by 0.58%, 0.46%, and 0.17% respectively. Energy stocks led the way, with a 2.28% gain in the S&P 500 sectors.
Mattel and AMC Entertainment Stocks Show Positive Movements
Toy manufacturer Mattel saw its shares rise by 1.99% following the record-setting domestic debut of its "Barbie" movie. AMC Entertainment also experienced a 36.05% surge after a court ruling blocked the theatre chain's stock conversion plan, which could have diluted investor holdings. However, AMC's preferred shares fell by 2.72%.
Nasdaq Adjusts Weights to Avoid Over-Concentration
Nasdaq, the exchange operator, decreased the weight of several companies that contribute to nearly half of the Nasdaq 100, aiming to address over-concentration in the benchmark. Meanwhile, overall business activity hit a five-month low in July due to slowing service-sector growth.
Market Overview: Advancing Issues Outnumber Decliners
Advancing issues surpassed decliners on the New York Stock Exchange by a 1.87-to-1 ratio. On the Nasdaq, decliners narrowly edged out with a 1.05-to-1 ratio. The S&P 500 reported 19 new 52-week highs and one new low, while the Nasdaq Composite recorded 47 new highs and 76 new lows.