S&P 500, Nasdaq: Highest Levels in 15 Months
Markets kept the rally going today across the board, with muted economic prints joining better-than-expected earnings reports for industry leaders making a heady brew for bullish investors. In fact, the S&P 500 and Nasdaq have now closed at their highest levels since April of 2022. The Dow gained +366 points on the session, +1.06%, while the S&P and Nasdaq grew +0.71% and +0.76%, respectively. The small-cap Russell 2000 again surpassed the field on the day, +1.27%, giving further oxygen to the notion this rally is far-reaching.
Fifteen minutes before today’s opening bell, we saw new figures for Industrial Production for June, which came in much lower than expected: -0.5% on headline was well off the 0.0% expected. The previous month’s revision went from -0.2% to a matching -0.5%, and the first negative read since early 2022.
Its sister report, Capacity Utilization, was also more muted than analysts were predicting: 78.9% on June headline was slightly below the 79.5% expected, while the May revision dipped 20 basis points to 79.4%. None of these are nightmare numbers, but they do reflect a further economic cooling — another arrow in the quiver for the Fed to not raise interest rates again a week from tomorrow.
Also, Business Inventories for May were even with expectations at +0.2%, up from +0.1% posted last time around. And the latest Homebuilder Confidence Index for July came out earlier today, staying high but slightly lower than the estimate to 56. Last month, we saw a surprise surge to 55, and today’s read marks the third-straight month above 50 on this index. By comparison, in December of last year this survey only came in at 31. Thus, we can see further evidence in the rebound for housing, even at elevated mortgage costs based on higher interest rates from the Fed.
Tomorrow is the most consequential Q2 earnings day yet: not only Tesla TSLA and Netflix NFLX results come out after the close, along with IBM IBM, Las Vegas Sands LVS and others, but also ahead of the open, with Goldman Sachs GS and United UAL among those companies reporting. Going back to Delta’s DAL earnings a week ago, we’ve overall seen a better-than-expected Q2 thus far. Tomorrow will go a long way in help us begin to understand if this is a far-reaching positive quarter or mostly concentrated to good airlines or financial institutions.
As much as we’re focused on the major market-impact events of this week, next Monday there’s a rare — but notable — thing happening that will affect investors in high-end tech names, or at least the seven biggest gainers of the Nasdaq 100 — a rebalancing of that sub-index, in order to more evenly distribute shares. This means that seven companies in the (non-financial institution) Nasdaq 100 have recently accounted for more than 50% of the sub-index, and those companies are: Nvidia NVDA, which is up a whopping +215% year to date; Microsoft MSFT, +51%, since the start of January; Meta Platforms META; Apple AAPL; Tesla TSLA; Amazon AMZN; and Alphabet GOOGL.
As of Monday morning, the total amount of Nasdaq 100 share for these seven companies will be reduced from 56% to 44%, with Nvidia and Microsoft taken down -3% each. Zacks Senior ETF Strategist Neena Mishra says, “This is great for investors… more diversification in funds of the Nasdaq.” Zacks Director of Research Sheraz Mian says, “This is a ‘technical’ issue that will wash out in a few days,” as these Magnificent 7 continue to outperform, but is nevertheless notable to investors in the near term.
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