Technology stocks, specifically chipmakers, could lead from the front on Thursday as a stellar third-quarter earnings report from Taiwan Semiconductor Manufacturing Company Ltd. (NYSE:TSMC) is triggering positive sentiment toward all artificial intelligence plays. Oil prices have rebounded and gold traded at a fresh record, while bond yields held steady ahead of a slew of market-moving data that include retail sales, a regional manufacturing activity index, industrial production, and jobless claims.
Earnings news could provide an offsetting impact in the eventuality of the market construing the economic data as inclement. Netflix, Inc. (NASDAQ:NFLX) is the first among the mega-cap earnings due after the market close and the results could evince interest among traders and set the tone for the tech reporting season.
Futures | Performance (+/-) |
Nasdaq 100 | +0.81% |
S&P 500 | +0.42% |
Dow | +0.11% |
R2K | -0.09% |
In premarket trading on Thursday, the SPDR S&P 500 ETF Trust (NYSE:SPY) edged up 0.42% to $584.76 and the Invesco QQQ ETF (NASDAQ:QQQ) jumped 0.83% to $495, according to Benzinga Pro data.
Cues From Last Session:
Small-caps ripped higher on Wednesday, extending their recent gains amid hopes of a benign economic environment but the major averages opened on a tentative note. Solid earnings reports from financial companies and strong gains by real-estate and utility stocks helped the major indices close firmly in the green.
The Dow Jones Industrial Average turned solidly higher immediately after spending the better part of the session above the unchanged line. The 30-stock blue-chip average ended at a fresh high, although it did not have enough momentum to break above its Oct. 15 intraday high of 43,277.78.
The S&P 500 Index and the Nasdaq Composite had a lackluster first-half before picking up momentum in the afternoon.
Of the 11 S&P 500 sector classes, only communication services and consumer discretionary stocks declined in Wednesday’s session.
Index | Performance (+/) | Value |
Nasdaq Composite | +0.28% | 18,367.08 |
S&P 500 Index | +0.47% | 5,842.47 |
Dow Industrials | +0.79 | 43,077.70 |
Russell 2000 | +1.64% | 2,286.68 |
Insights From Analysts:
Delving into the small-cap rally that has been on, LPL Financial Chief Technical Strategist Adam Turnquist said after being stuck in a consolidation phase over the past few months, small-caps have picked up some momentum in recent sessions, with the growth outlook recently improving — underpinned by better-than-feared labor market conditions — and increased visibility into Fed rate cuts, he said.
The strategist noted that the Russell 2,000 Index, or RTY, has rallied off the lower end of its rising price channel. “Recent strength in the banking space — the RTY's largest sector by weighting — has further supported small caps,” he said.
Technically, a close above 2,275 would confirm a breakout from its current symmetrical triangle and leave the 2021 highs (2,243) as the next resistance hurdle to clear, Turnquist said, adding that momentum indicators have also recently turned bullish, adding to the evidence of a topside breakout.
“Despite the improving absolute performance, the RTY vs. S&P 500 ratio chart still remains in a downtrend and below its declining 200-day moving average (DMA),” he said. A close above the July highs would validate a trend reversal in favor of small caps outperforming, he added.
Meanwhile, a fund manager thinks AI-levered companies could be defensive plays. Louis Navellier said, “Semiconductor demand has become the new proxy for global growth trends, being incorporated into almost everything, and also has geopolitical implications with technology export controls in place and China continuing to saber rattle about taking Taiwan back.”
“The upshot here is the inference that AI will still have legs even if we slide into a global recession in ’25,” he added.
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Upcoming Economic Data:
Stocks In Focus:
Commodities, Bonds And Global Equity Markets:
Crude oil futures are reversing course and were up modestly after their recent pullback and gold futures traded at a record. Bitcoin (CRYPTO: BTC) slipped over 1% over the past 24 hours and was at a sub-$67K level.
The 10-year U.S. Treasury note yield was little changed at 4.036%.
The Asian markets ended mixed on Wednesday, as the Japanese, Chinese, Hong Kong, Indian, and South Korean markets retreated. Most other markets ended on a firm note, tracking higher energy prices and the positive close on Wall Street overnight.
European stocks traded in the green in the early hours, thanks to earnings optimism.
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