NASDAQ 100, Dow Jones, S&P 500: Tech Giants Lead Wall Street’s Bullish Start; Fed Rate Decision Looms

Highlights

• US stocks rise on tech giants’ earnings anticipation.
• Nasdaq outperforms with a 34% surge this year.
• Federal Reserve’s rate decision is in focus.

Overview

The major US stock indexes opened higher on Monday, driven by investor anticipation of earnings reports from key growth and technology companies. All eyes are on tech giants like Meta Platforms, Microsoft, and Alphabet, as analysts predict an end to the year-long slowdown in their cloud businesses. Additionally, a surge in digital ads is expected to boost profits for these industry giants.

However, last week, not all quarterly reports were rosy. Netflix and Tesla posted less-than-stellar results, with the electric-vehicle maker seeing a 1.5% dip in premarket trading after a downgrade from UBS. Despite this, other megacap growth and technology shares have shown resilience by edging higher.

Amidst these earnings announcements, the spotlight is also on the Federal Reserve’s policy meeting later in the week. The central bank is anticipated to raise interest rates by 25 basis points on Wednesday. While most economists expect this to be the last increase in the current tightening cycle, there are concerns about the Fed being too hawkish or earnings falling short of expectations.

Despite these uncertainties, optimism remains for growth stocks, especially in the field of generative artificial intelligence, where demand seems limitless. The Nasdaq, which has already surged 34% this year, outperforming its peers, is buoyed by hopes of an end to the Fed’s tightening cycle and positive sentiments around AI.

In the cash market, the blue chip Dow is at 35323.48, up 95.79 or +0.27%. The benchmark S&P 500 Index is at 4554.88, up 18.54 or +0.41% and the tech-weighted Nasdaq Composite is trading 14101.41, up 68.60 or +0.49%.  Last week saw the S&P 500 and Dow ending on a high note, supported by strong quarterly reports from healthcare and financial companies.

However, it’s not all smooth sailing. Domino’s Pizza experienced a 1.2% drop after missing quarterly revenue estimates due to increased delivery fees and higher prices impacting demand for its products. Conversely, there were some notable gainers, with Mattel‘s “Barbie” movie setting a record as the biggest domestic debut of 2023.

Furthermore, exchange operator Nasdaq has taken steps to address “overconcentration” in the benchmark by trimming the weight of certain companies in the Nasdaq 100.

In terms of economic indicators, on Monday, S&P Global is expected to show a slight dip in the flash services sector PMI but a marginal increase in the closely watched flash manufacturing PMI.

Overall, the week ahead is packed with earnings reports and key economic events, making it a crucial time for investors to closely monitor the markets and make well-informed decisions.