Major tech stocks, led by Apple and Tesla, drove the Nasdaq to a higher close on Monday, while the Dow Jones and the S&P 500 also posted modest gains amidst light pre-holiday trading. Investors are eagerly awaiting key U.S. labor market data later this week for insights into the interest rate outlook.
Notable increases in Apple (AAPL), Microsoft (MSFT), and Amazon.com (AMZN) contributed significantly to the Nasdaq’s performance. Ben Snider, a senior equity strategist at Goldman Sachs Research, commented, “The primary driver of earnings is GDP, and the economy still appears robust. We project U.S. economic growth to exceed 2% this year, suggesting strong underlying revenue growth. Additionally, profit margins seem to be recovering after a challenging period.”
Tech giants, which constitute a substantial portion of S&P 500 earnings, are also demonstrating strength. Shares of Tesla (TSLA) surged ahead of its second-quarter vehicle delivery data. Despite maintaining an “underweight” rating, Wells Fargo included Tesla in its third-quarter “Tactical Ideas list,” though it voiced concerns about potential declines in delivery growth and the risk of price cuts.
Meanwhile, semiconductor stocks such as Advanced Micro Devices (AMD) and Arm Holdings declined, pushing the Philadelphia SE Semiconductor index (.SOX) to nearly a one-week low. Real estate stocks (.SPLRCR), viewed as bond proxies, fell as U.S. Treasury yields reached multi-week highs. However, higher yields tend to boost bank profits, lifting the S&P 500 banks index (.SPXBK) to its highest point in over a month.
JPMorgan Chase (JPM) hit an all-time high after the largest U.S. bank announced an increase in its dividend to $1.25 per share from $1.15 and authorized $30 billion in new share buybacks effective July 1.
Trading volumes were thin ahead of the U.S. Independence Day holiday on Thursday, and light trading is expected throughout the week. Manufacturing PMI data from the Institute for Supply Management indicated that manufacturing contracted for a third consecutive month in June, with prices paid dropping to a six-month low, a positive sign for the Federal Reserve’s efforts to combat inflation. Traders continue to anticipate around two interest rate cuts this year, beginning in September, according to LSEG FedWatch.
This week’s economic data releases include JOLTS job openings on Tuesday, ADP employment, factory orders, ISM services PMI data, and minutes from the Fed’s latest policy meeting on Wednesday, with non-farm payroll data expected on Friday. Fed New York President John Williams expressed his belief that inflationary pressures are moderating back towards the 2% target.
Preliminary data showed the S&P 500 (.SPX) gained 14.61 points, or 0.26%, ending at 5,474.71 points, while the Nasdaq Composite (.IXIC) added 144.37 points, or 0.83%, closing at 17,876.26. The Dow Jones Industrial Average (.DJI) rose 46.25 points, or 0.12%, to 39,165.11.
On Friday, the Nasdaq and S&P 500 achieved their third consecutive quarterly gains, with the tech-heavy index marking this feat for the first time in three years. However, the Dow’s quarterly decline raised concerns about the need for greater diversification in investor portfolios.
Chewy (CHWY) dropped, reversing earlier gains, after stock influencer Keith Gill, known as “Roaring Kitty,” disclosed a 6.6% stake in the pet products retailer.
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