US indices: Nasdaq Hits All-Time High; Dow and S&P 500 Trail Behind

U.S. indices play a crucial role in the financial markets. On Friday, the Nasdaq Composite reached a new all-time high, driven largely by significant gains in major tech stocks, concluding a turbulent week on Wall Street. Meanwhile, the S&P 500 also saw a rise of 0.6%, achieving a record of its own. In contrast, the Dow Jones Industrial Average only saw a modest increase of 38 points, or less than 0.1%.

Nasdaq Reaches New High

On Friday, the Nasdaq Composite achieved an all-time high, while the S&P 500 and Dow Jones Industrial Average both declined, ending their six-week winning streaks. In Asia-Pacific markets on Monday, trading was mixed. Japan's Nikkei 225 surged approximately 1.8%, as the yen fell to a three-month low against the dollar following the recent election results in the country.

The Nasdaq was significantly impacted by the economic growth scare selloff this summer, experiencing a correction of over 10% in August as investors sold off tech stocks viewed as vulnerable to a potential recession. In contrast, the more industry-neutral Dow and S&P 500 fared better during this period.

However, recent data over the past two months has indicated little sign of an economic slowdown, helping to restore confidence in the earnings growth needed to support the Nasdaq's remarkable gain of more than 70% over the last two years. A substantial portion of this rally is linked to investor enthusiasm for tech companies, particularly those involved in artificial intelligence. Nvidia, a key player in the semiconductor technology driving generative AI, exemplifies this trend, with its market capitalization soaring from under $300 billion in October 2022 to $3.5 trillion by Friday.

Dow Jones Falls As Treasury Yields Continue To Rise

On Tuesday, the Dow Jones Industrial Average and other major stock indexes fell as interest rates continued to rise. In contrast, Nvidia (NVDA) faced challenges in extending its record-setting gains in the stock market.

Following the opening bell, the Dow dropped 0.4%, with the S&P 500 experiencing a similar decline. The tech-heavy Nasdaq Composite also dipped 0.3% in early trading.

JPMorgan, the financial leader within the Dow Jones, closed below the 225.48 buy point of a flat base, as noted by MarketSurge pattern recognition. The stock was up 0.4% on the day.

In addition to the Dow, Texas Roadhouse, a leader in the restaurant sector, successfully reclaimed a 177.72 flat-base entry during last week’s gains. However, its shares fell 0.9% on Tuesday.

Meanwhile, retail giant MercadoLibre is currently forming a flat base with a buy point at 2,161.73 and is finding support at the 50-day moving average. The stock declined by 1% on Tuesday.

The S&P 500 is reporting mixed results

As we reach this stage of the Q3 earnings season, the S&P 500 is reporting mixed results. Positive earnings surprises from several companies have been countered by significant downward revisions in EPS estimates for some firms across three sectors. Consequently, while the index is reporting higher earnings for Q3 compared to last week, it shows lower earnings than at the end of the quarter. On a year-over-year basis, the index is experiencing earnings growth for the fifth consecutive quarter, but this growth rate is the lowest since Q2 2023 at -4.2%.

Currently, 37% of S&P 500 companies have reported their Q3 2024 results. Among these, 75% exceeded EPS estimates, slightly below the 5-year average of 77% but in line with the 10-year average of 75%. Overall, companies are reporting earnings that are 5.7% above estimates, which falls short of the 5-year average of 8.5% and the 10-year average of 6.8%. These historical averages reflect results from all 500 companies, not just those that have reported so far.

In the past week, positive EPS surprises from various sectors—especially Financials and Consumer Discretionary—have significantly contributed to the overall earnings growth rate. Conversely, downward revisions in EPS estimates for companies in the Industrials, Health Care, and Energy sectors, partly offset by positive surprises in Financials, have contributed to the overall decrease in earnings growth for the index.

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Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.