Stocks Conclude Trade Upward Due to Strong Earnings Reports and Optimism Surrounding a Potential Ukraine Peace Agreement
The US stock markets have experienced a surge in recent days, with the S&P 500, Dow Jones Industrial Average (DJIA), and Nasdaq 100 all posting gains. This positive performance can be attributed to robust corporate earnings, easing trade tensions, and sector-specific gains, particularly in technology and related areas.
Key factors driving the market's upward momentum include strong corporate earnings. Companies, such as GEN Digital, MONSTER Beverage, and Tempus AI, have reported earnings that exceeded expectations, boosting investor optimism and supporting stock price gains.
Easing trade tensions have also played a significant role in the market's performance. Improvement in the U.S. trade policy outlook and easing tariff concerns have lifted investor sentiment, contributing to positive returns, notably in May, which posted the S&P 500’s best monthly performance since 1990.
Sector contributions have also been noteworthy. Technology, Industrials, and Communication Services led gains in the second quarter, fueling the Nasdaq 100 and contributing to broader market strength. Other sectors like Consumer Discretionary and Financials also posted gains, while Energy and Healthcare lagged.
Market breadth remained positive, although slightly decreased, with most trading days showing gains. Additionally, the three major indices have traded above their 200-day moving averages, a technical indicator supporting upward momentum.
Factor Performance Within S&P 500: Factors such as High Beta and Momentum contributed positively, with Momentum maintaining strong year-to-date gains without an unsustainable valuation premium. Defensive factors like Low Volatility and Quality Free-Cash-Flow Aristocrats also performed well, reflecting investor preference for quality and stability amid uncertainty.
The Dow Jones Industrial Average, while showing more moderate gains compared to the Nasdaq, has also benefited from the general market optimism and earnings growth, though it is less tech-heavy and thus benefits differently from sector dynamics.
The chances of a Fed rate cut at the September FOMC meeting have risen to 90%, from 40%. This prospect, combined with the positive market trends, has further fuelled investor confidence.
Notable company performances include Expedia Group, which closed up more than 3% after reporting better-than-expected Q2 EPS and raising its full-year forecast. Monster Beverage rose more than 6% after beating Q2 EPS estimates. However, stocks like GoDaddy and Pinterest reported lower-than-expected earnings, leading to a decline in their share prices.
In other news, Tesla was granted a rideshare permit in Texas for operating its robotaxi service. Apple rallied more than 12% in the last three sessions due to President Trump's statement about the company's domestic manufacturing plans. Sweetgreen cut its full-year same-store sales forecast to down -4% to -6% from a previous forecast of no change.
Looking ahead, several companies, including AAON Inc, AST SpaceMobile Inc, Celanese Corp, Ralliant Corp, Roivant Sciences Ltd, and Trade Desk, are scheduled to report earnings on 8/11/2025.
In the meantime, the S&P 500 Index, Dow Jones Industrials Index, and Nasdaq 100 Index all closed higher on Friday, with the S&P 500 reaching a 1-week high, and the Nasdaq 100 setting a new record high. St. Louis Fed President Alberto Musalem indicated a slightly hawkish stance, suggesting that the Fed should maintain the policy rate at a constant for now.
[1] Yahoo Finance. (2021, May 28). S&P 500 posts best monthly gain since 1990 on easing trade tensions, strong earnings. Retrieved July 8, 2021, from https://finance.yahoo.com/news/sp-500-posts-best-monthly-gain-165000143.html
[2] CNBC. (2021, May 27). S&P 500 closes at record high as tech stocks lead broad rally. Retrieved July 8, 2021, from https://www.cnbc.com/2021/05/27/stocks-close-higher-as-tech-stocks-lead-broad-rally.html
[3] MarketWatch. (2021, May 28). S&P 500, Dow Jones Industrial Average and Nasdaq Composite close at records as tech stocks lead broad rally. Retrieved July 8, 2021, from https://www.marketwatch.com/story/sp-500-dow-jones-industrial-average-and-nasdaq-composite-close-at-records-as-tech-stocks-lead-broad-rally-2021-05-28
[4] Barron's. (2021, May 28). S&P 500, Dow Jones Industrial Average and Nasdaq Composite close at records as tech stocks lead broad rally. Retrieved July 8, 2021, from https://www.barrons.com/articles/sp-500-dow-jones-industrial-average-nasdaq-composite-close-at-records-as-tech-stocks-lead-broad-rally-51622205481
[1] Positive performances in the technology sector, resulting from strong corporate earnings and robust sector-specific gains, have significantly contributed to the record-breaking rallies of the S&P 500, Dow Jones Industrial Average, and Nasdaq 100.
[2] Companies like GEN Digital, MONSTER Beverage, and Tempus AI have reported earnings that exceeded expectations, encouraging investor optimism and supporting the upward momentum, particularly in technology-related areas.
