Tech stocks push markets higher: Tesla reports after market

Stocks rose on Wednesday, fueled by a rally in tech stocks, as all major averages reached their highest point since early June.

The Nasdaq Composite jumped 1.58 per cent to 11,897.65, and the S&P 500 advanced 0.59 per cent to 3,959.90. Meanwhile, the Dow Jones Industrial Average was up 47.79 points, or 0.15 per cent, to 31,874.84, lagging the other two benchmarks and alternating between gains and losses during the session.

Wednesday marked the highest closing level for the Nasdaq since June 8 – and the highest since June 9 for the Dow and the S&P 500. While breadth has been showing significant improvement, there are still more stocks making new 52-week lows rather than new 52-week highs.

After market Tesla has reported better than expected earnings – with the stock currently up 2 per cent after market.

Information technology and consumer discretionary stocks led gains in the S&P 500, with each sector up more than 1 per cent on Wednesday. Meanwhile, more defensive sectors such as health care and utilities lagged the broader market index. Semiconductor stocks outperformed after the Senate pushed forward a $50 billion to bolster chip manufacturing in the US. Shares of Advanced Micro Devices jumped 4.1 per cent, Nvidia was up 4.8 per cent, and Qualcomm advanced 2.9 per cent.

In further Elon Musk news, Twitter won its effort to expedite its trial with Elon Musk yesterday, in its lawsuit to force Musk to close his $44 billion acquisition of the company. So many people tried to listen to the proceedings that the dial-in hit capacity — and we hear advisers across Wall Street were huddled around speakerphones. The two sides are gearing up for a trial in October.

Streaming stocks surged on the back of better-than-expected earnings from Netflix as the company lost fewer subscribers than expected. The streaming service reported yesterday that it lost nearly 1 million subscribers in the second quarter, far fewer than it had forecast. What’s more, Netflix said some of its strategies to stem losses, like an ad-supported option for consumers and a crackdown on password sharing, would boost revenue as soon as next year. Shares of Netflix jumped about 7.4 per cent. Disney advanced roughly 3.8 per cent. Paramount climbed 3.8 per cent, and Roku surged 6.9 per cent.

About 12 per cent of S&P 500 companies have reported earnings so far this quarter. Of those, 68 per cent have beaten analyst expectations, according to FactSet. Investors had been awaiting this earnings season for clues on how companies are coping with the worst inflation in more than 40 years.

On tech valuation front a recent report by T Rowe Price has put valuations into perspective. An analysis of stock performance during the pandemic era shows that, despite the steep yeartodate sell-off, tech stocks have still returned more than twice as much as the broader market.

The earnings for many technology companies surged during the pandemic due to the accelerated adoption of many important technology trends—such as cloud computing, online shopping, and streaming video. While tech stocks gained significantly during this period, their outperformance was partially driven by higher earnings rather than entirely by increases in valuations.

Overall, the rout in technology stocks has helped to remove much of the froth, and valuations have become more reasonable since their peak in November 2021. However, these stocks are still not cheap relative to the broader market. It appears a growth investment strategy may have to take a back seat to a value orientated approach while tech valuations seem elevated

Meanwhile, bitcoin breached the $24,000 threshold for the first time in more than a month. 

Iron ore is 1.1 per cent higher at US$97.55 a tonne. Iron ore futures are pointing to a 0.7 per cent gain.

Gold lost $10.40 or 0.6 per cent to US$1718 an ounce.

Silver was down $0.04 or 0.2 per cent to US$18.67 an ounce.

Copper was up $3.40 or over 1 per cent to US$332.50 a pound.

Oil prices slipped on Wednesday, after U.S. government data showed lower gasoline demand during the peak summer driving season and as interest rate hikes by central banks to fight inflation fed fears the economy could slow, cutting energy demand.Oil lost $1.96 or 1.9 per cent to US$102.26 a barrel

On the currency front,  one Australian dollar has weakened compared to the US dollar yesterday, buying 68.91 US cents (Wed: 69.02 US cents), 57.52 Pence Sterling, 95.26 Yen and 67.69 Euro cents.

The SPI futures are pointing to a 0.5 per cent fall.

Figures around the globe

Across the Atlantic, European markets closed lower. Paris fell 0.3 per cent, Frankfurt lost 0.2 per cent and London’s FTSE closed 0.4 per cent lower.

Asian markets closed higher. Tokyo’s Nikkei gained 2.7 per cent, Hong Kong’s Hang Seng added 1.1 while China’s Shanghai Composite closed 0.8 per cent higher.

Yesterday, the Australian sharemarket added 1.7 per cent to 6,759.

Dividends payable

There are five companies set to pay eligible shareholders today.

Charter Hall Social Infrastructure REIT (ASX:CQE)
Forager Australian Shares Fund (ASX:FOR)
Graincorp (ASX:GNC)
Magellan Global Fund (ASX:MGF)
Magellan Global Equities Fund Currency Hedged (ASX:MHG)

Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.