Jamie Spencer
The Nasdaq Composite hit a record high on Tuesday, rising 0.7% to cross the 18,700 mark as investors prepared for a crucial week of corporate earnings. The tech-centric index’s gains came amid anticipation for earnings reports from major players, including Alphabet, Snap, Reddit, Chipotle, and Advanced Micro Devices (AMD). As the busiest week of the earnings season unfolds, investor focus remains firmly on how tech giants will fare amid heightened price-to-earnings (PE) ratios and rising Treasury yields.
Tech Leads as Nasdaq Surges
The Nasdaq’s 0.7% increase set the stage for a robust start to the week, with the S&P 500 also ticking up 0.2%. Meanwhile, the Dow Jones Industrial Average underperformed, falling by 110 points, or 0.3%, as tech stocks propelled gains in the broader market. Investors are especially keen on reports from Meta and Microsoft, set for release Wednesday, and Apple on Thursday. Shares of Meta and Alphabet each advanced over 1% on Tuesday ahead of their earnings announcements.
CFRA Research’s chief investment strategist, Sam Stovall, commented on the current market dynamics, stating, “It’s currently an expensive market, and so I think that investors need for earnings growth to accelerate in order to justify these higher PE ratios.” With elevated valuations, the tech sector’s performance this week will be a major factor in determining market sentiment moving forward.
Treasury Yields and Market Volatility Loom
Amid earnings optimism, traders are also keeping a close watch on Treasury yields, with the benchmark 10-year Treasury yield climbing to its highest level since July. Rising yields present a headwind for the tech-heavy Nasdaq, as higher rates can reduce the attractiveness of high-valuation stocks. Jonathan Krinsky, chief market technician at BTIG, advised caution as volatility looms ahead of the U.S. presidential election, now just five trading days away.
“While we aren’t looking for a bear market, our conviction remains high that we are poised for some downside volatility over the coming weeks,” Krinsky wrote. His outlook suggests that while the Nasdaq may continue its upward trend in the short term, volatility tied to election uncertainties and macroeconomic factors could introduce near-term fluctuations.
Earnings Season in Full Swing
This week marks the busiest period of the earnings season, with over 150 S&P 500 companies scheduled to report by Friday’s close. The quarterly results from tech giants are particularly important, given their outsized impact on major indexes. Notably, the Nasdaq has seen eight positive sessions out of the last nine, reflecting sustained investor confidence in tech stocks despite broader market challenges.
For blue-chip stocks, Tuesday’s session broke a five-day losing streak for the Dow, providing a brief reprieve amid mixed performances across other sectors. However, analysts remain cautious, particularly around high-valuation stocks that could be vulnerable if earnings results fail to meet expectations.
The Nasdaq’s record high and the upcoming tech earnings reports are setting the stage for a critical week in the market. With investor focus on earnings growth to support high valuations, this week’s results will play a key role in shaping sentiment for the final stretch of the year. As Treasury yields rise and the U.S. presidential election approaches, a balance between optimism for tech and caution around volatility will likely define the market’s near-term path.
