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Nasdaq Surges 2.7% As Strong Earnings/US Data Boost Growth Stocks; PayPal Gains 9.0%

Cory Russell

Aug 04, 2022 14:58

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Nasdaq 100, S&P 500 Break Higher Despite Strong Earnings, Strong US Data, and Fed Remarks

The US ISM Services PMI data for July and Factory Orders statistics for June sparked confidence that the US economy is, for the time being, not in recession, and on a bombardment of positive earnings reports, the S&P 500 and Nasdaq 100 indexes burst out to new multi-week highs on Wednesday.


Stocks also took solace from comments made by Fed policymaker Mary Daly, who downplayed the possibility of a further 75 basis point rate hike from the Fed in September. However, she also pushed back (as have other Fed policymakers in the last two days) against overly pessimistic market expectations for the Fed to start reducing interest rates in early 2023.


The S&P 500 index rose 1.6 percent to break over 4,150 for the first time since early June and leave its 100-Day Moving Average, which is located just around 4,120, in the dust. This was a bullish combination for stocks. Bulls are still aiming for a challenge of the highs from early June at 4,180.


While the Dow climbed 1.3 percent to cross back above its 100DMA just over 32,700, the Nasdaq 100 index rose 2.7 percent to reach its highest level since early May in the 13,200s.

Big Tech and Growth Stocks are the Best

The market gain on Wednesday was driven by "growth" firms, including some of the biggest names like Apple, Microsoft, Alphabet, Amazon, and Meta Platforms. The chief investment officer of Bokeh Capital Management, Kim Forrest, advised investors to switch from value equities to growth ones if the economy were not now in recession but neither blazing upward either.


Gains in growth stocks were aided by a nearly 10% increase in PayPal Holding's share price after the payment technology company raised its annual profit projection and reported that activist investor Elliot Management had amassed a $2 billion holding. The S&P 500 GICS sectors with the highest concentration of growth companies, Information Technology, Communication Services, and Consumer Discretionary, all increased by 2.5 percent to 3.0 percent on Wednesday.


Other significant companies that have reported earnings include Starbucks, which rallied after exceeding bottom-line analyst expectations in Q2 amid strong demand for its coffee in the US, CVS Health, the largest US pharmaceutical chain, and Moderna, which jumped after announcing a $3 billion share repurchase program.

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