Nasdaq climbs to document highs as traders purchase Apple forward of revenue, S&P 500 is flat
The Nasdaq Composite hit another record high on Thursday as investors looked to strong earnings from big tech companies next week.
The tech-heavy benchmark rose 0.5%, while Apple gained 3%. The Dow Jones Industrial Average was down 50 points in the volatile session, while the S&P 500 was down slightly due to losses in the energy sector. The latter two averages also hit new all-time highs in morning trading before falling down.
Apple’s jump came after Morgan Stanley’s top analyst Katy Huberty said she expected record pressure in the December quarter for the tech giant. Optimism rises that big tech companies will impress Wall Street when they file earnings reports next week. Apple, Microsoft and Facebook were up at least 5% this week ahead of their quarterly results.
Stocks closed at record highs in the previous session when President Joe Biden took office, hoping that improved vaccine adoption will make for a smoother and faster reopening. Some on Wall Street are optimistic that Biden’s plans to fight the pandemic will give the stock market another boost through 2021.
On his first full day in office, Biden released details of his Covid plan, including 10 executive orders and his intention to use the Defense Production Act to boost production of protective equipment. Biden will seek to accelerate the adoption of vaccines by providing more local and state funding, creating more vaccination sites, and launching a national awareness campaign.
“We see the pace of vaccinations as the main driver for stocks through 2021, much like shifts in mobility and Covid cases drove stocks in 2020,” Keith Parker, head of equity strategy at UBS, said in a note. “Removing bottlenecks in the delivery of doses would be a positive case in the short term.”
Still, the big spike has also pushed valuations to historically high levels, making investors wary of a possible retreat. The S&P 500 is up 2.8% so far in the new year, and the tech-heavy Nasdaq is up nearly 5% over the same period.
According to FactSet, the S&P 500 is currently trading at 22.8 times the future profit, close to the level during the dotcom bubble 2000. The broad equity benchmark is also 16% above the 200-day moving average and is thus twice as high as in the bull markets.
“The recent rally on the stock market should mean a sideways breather (at least) in the short term,” said Matt Maley, chief market strategist at Miller Tabak, in an email. “The breadth in the market was pretty narrow during the rally.”
Major US carrier United fell 6.4% after posting its fourth straight quarter loss. The airline warned sales would continue to suffer in early 2021 as the pandemic drags on.
The action on Thursday came after a better-than-expected reading on unemployment claims. Initial unemployment insurance claims for the week ended January 16 were 900,000, an estimate of 925,000 according to estimates by economists polled by Dow Jones.
Biden was sworn in as the 46th US President on Wednesday, succeeding former President Donald Trump. Investors are watching to see if Biden can get his proposed $ 1.9 trillion coronavirus relief bill through Congress. House spokeswoman Nancy Pelosi said Thursday the chamber was ready to pass the bill in the first week of February.