US Stocks: Momentum Stocks Drive S&P 500, Nasdaq to Record Highs

The major stock indexes closed lower on Wednesday as investors continued to gravitate toward high momentum stocks that have outperformed since the onset of the coronavirus pandemic. Additionally, upbeat earnings helped the S&P and NASDAQ indexes continue their streak of all-time closing highs, while the Dow, which has yet to overtake its pre-COVID record, was only modestly higher.

In the cash market on Wednesday, the benchmark S&P 500 Index settled at 3478.73, up 35.11 or +1.17%. The blue chip Dow Jones Industrial Average finished at 28331.92, up 83.48 or +0.33% and the technology-driven NASDAQ Composite closed at 11665.06, up 198.59 or +2.09%.

Stocks in the News

Salesforce.com, the cloud computing company and soon-to-be Dow component, gave the S&P its biggest boost, its shares soaring 24.8% following its beat-and-raise earnings report.

Hewlett Packard Enterprise Co. rose 4.1% after its full-year outlook beat expectations, while tax software firm Intuit Inc. advanced 2.5% on a 17% rise in quarterly revenue.

Apparel retailer Nordstrom Inc. tumbled 5.1% following its bigger-than-expected quarterly losses after being forced by mandated lockdowns to shutter its stores.

Style and Sectors

Cyclical stocks, which tend to perform well in times of economic recovery, were mostly lower.

Energy was the biggest percentage loser among S&P 500 sectors, dropping 1.6% as Hurricane Laura bore down on the Texas-Louisiana coastline, posing the largest threat to U.S. energy assets since 2005’s Hurricane Katrina. The coming storm, which is now a category 4, prompted crude producers and refiners to shut down their facilities. Energy firms are expected to take an earnings hit because of lower demand for refinery products.

Commercial air carrier stocks were also a drag on the S&P 1500 Airline Index. It dropped 1.5% even after the White House announced President Trump was weighing an executive action to avoid massive layoffs in the sector.

Communications services led the 11 major sectors in the S&P in percentage gains.

Earnings Season Winds Down

Second-quarter earnings season has wound down, with 483 of the companies in the S&P 500 having reported. Of those, 82.2% have beaten consensus, according to Refinitiv data.

In aggregate, analysts now see earnings for the April to June quarter having dropped by 29.9% year-on-year, according to Refinitiv.

The Internals

Declining issues outnumbered advancing ones on the NYSE by a 1.37-to-1 ratio; on NASDAQ, a 1.38-to-1 ratio favored decliners.

The S&P 500 posted 34 new 52-week highs and no new lows; the NASDAQ Composite recorded 83 new highs and 7 new lows.