S&P 500 Rallies to Fresh Multi-week Highs Near 4,000, Tesla Surges 13.5%

S&P 500 and Nasdaq 100 reach new multi-week highs thanks to Tesla

The S&P 500 and Nasdaq 100 indices, which are dominated by big tech/growth stocks, increased on Thursday and reached new highs since early June. This was largely due to a surge in Tesla's share price following the company's second-quarter earnings report, which exceeded expectations thanks to price increases across all of its car models. According to analysts, these price hikes helped lessen the effect of growing ingredient prices as well as other manufacturing difficulties, such as China's unclear Covid-19 scenario.

The S&P 500 came very close to testing the 4,000 mark but was unable to do so. Meanwhile, the Nasdaq 100 stormed beyond the 12,500 level and is aiming for a retest of early-June highs around 12,900. Strong Tesla Q2 earnings results follow Netflix's earlier in the week more optimistic subscriber growth outlook and better-than-expected subscriber counts, which experts believe is supporting large-cap tech companies.

As a consequence, the FAANG index has continued to perform better this week than the larger US share market. The index includes Google, Amazon, Apple, Netflix, and Facebook (Meta Platforms) (Alphabet). The index has gained close to 6.0 percent over the last week and is testing its early June highs, while the S&P 500 and Nasdaq 100 have gained, respectively, 3.0 percent and 4.9 percent. Data reflecting a slowdown in the US job market and the worst manufacturing confidence in the mid-Atlantic region in ten years (excluding the shock of the 2020 pandemic) failed to dampen investor optimism toward stocks.

Energy, airline, and telecom stocks decline

After disappointing profits and warnings about ongoing high cost pressures, the S&P 500 Airlines Index last fell by close to 5.0 percent on Thursday, with United Airlines and American Airlines leading the decline. Aside from that, US energy companies underperformed on Thursday due to a steep decline in the price of US oil (WTI). After AT&T lowered its revenue projections, citing challenges in bill collection, other US telecom companies also fell, hurting the broader Communications Services sector.

Gains in European Stocks Despite a Huge ECB Increase

Several prominent companies reported solid earnings results, which helped European markets recover from the European Central Bank's larger-than-expected rate rise, which lifted interest rates out of negative territory for the first time in eight years. The Stoxx 600 index for all of Europe rose again into the 424s but was unable to surpass previous weekly highs in the 425s.

On Thursday, anxiety over the energy situation in the Eurozone somewhat decreased, however concerns remained front of mind. The state-owned gas producing and exporting behemoth Gazprom in Russia restarted gas supplies to Europe on Thursday after scheduled maintenance on the Nord Stream 1 pipeline was finished, but at only approximately 40% of pre-maintenance levels.

One day after the EU encouraged member states to reduce their gas use by 15% between now and next March, Russian gas shipments into Europe were resumed. Analysts believe that there is still a high chance of a complete cutoff of Russian gas. This might cause a number of European nations that are heavily reliant on Russian energy to enter a severe recession, the IMF warned earlier in the week.

Another thing on European equities investors' concerns was the political unrest in Italy. Following the Wednesday breakdown of Italy's governing government coalition, the FTSE MIB index for Italy decreased. Mario Draghi, the Italian prime minister, later submitted his resignation to President Sergio Mattarella, and a vote is anticipated for late Q3 or early Q4.