Overview
On Thursday, U.S. stock markets saw mixed results, with the Dow Jones Industrial Average closing at a record high for the third time in four sessions. Strong financial earnings and positive momentum in small-cap stocks helped offset declines in mega-cap technology shares. The S&P 500 narrowly missed a new record, while the Nasdaq Composite also edged up, buoyed by a recovery in Nvidia’s stock after a sharp drop earlier in the week.
Financials led the market higher, as strong earnings reports from large banks, including Morgan Stanley, helped lift investor sentiment. Small-cap stocks outperformed, with the Russell 2000 posting its highest close since 2021, as investors rotated into sectors with more attractive valuations. The broader market remains optimistic, with the expectation that strong corporate earnings will continue to drive gains in sectors outside of technology.
On the tech side, mega-cap companies such as Apple, Microsoft, and Alphabet experienced profit-taking as investors reassessed high valuations after significant year-to-date gains. However, Nvidia rebounded, gaining 3.1%, after falling nearly 5% in the previous session due to concerns about AI chip exports and geopolitical uncertainties.
Fear & Greed Index
Neutral – Investors balanced strong financial earnings and small-cap gains with concerns over stretched tech valuations and the Federal Reserve’s potential interest rate cuts.
Sector Performance
- Winners:
- Financials: Morgan Stanley surged 6.5% on strong Q3 investment banking results, leading the broader financial sector higher. The S&P Banks Index rose 1.2%.
- Utilities: Increased 2%, with Dominion Energy leading the sector, gaining 5.1% after its announcement of a partnership with Amazon to develop nuclear technology for data centers.
- Industrials: Buoyed by strong economic sentiment, United Airlines rose 12.4% after reporting better-than-expected profit forecasts and announcing a $1.5 billion share buyback program.
- Losers:
- Technology: Mega-cap tech stocks faced declines, with Apple, Alphabet, Meta, and Microsoft down 0.2% to 1.6%, reflecting investor concerns about high valuations and the limited potential for further near-term upside.
Key Movers
- Morgan Stanley (MS): Rose 6.5% on robust Q3 investment banking results.
- First Horizon (FHN): Increased 4.1%, benefiting from favorable third-quarter results among regional banks.
- Nvidia (NVDA): Gained 3.1% after a sharp drop in the previous session, driven by renewed investor interest in AI chip demand.
- United Airlines (UAL): Surged 12.4% after raising Q4 profit expectations and announcing a significant buyback program.
Economic Data
- Corporate Earnings: Financials continued to perform well as JPMorgan Chase and other large banks posted strong profits, driving the sector higher.
- Retail Sales: Investors remain optimistic as strong retail sales and industrial production data are expected to support market gains.
- Federal Reserve Policy: Investors are pricing in a high probability of a 25-basis-point rate cut at the Federal Reserve’s November meeting, according to CME’s FedWatch.
Outlook
As the earnings season progresses, market participants will focus on how non-tech sectors, particularly financials and small caps, continue to perform. The robust earnings from banks and regional financial institutions suggest that the broader economy remains healthy, which could further support these sectors in the weeks ahead.
On the economic front, upcoming retail sales and industrial production data are expected to provide insight into consumer strength and manufacturing activity. Positive data could drive the market higher and influence Federal Reserve rate decisions. Defensive sectors, such as utilities and industrials, are expected to benefit from increased demand and favorable interest rates, while the technology sector may face continued pressure as investors rotate into sectors with more attractive valuations.