The Nasdaq Composite jumped to a record high once again Thursday as investors bet on strong earnings from big tech companies next week.
The tech-heavy benchmark climbed 0.5% as Apple popped 3%. The Dow Jones Industrial Average slipped 50 points in the volatile session, while the S&P 500 traded slightly lower, pressured by losses in the energy sector. The latter two averages also touched new all-time highs in morning trading before turning lower.
Apple’s jump came after top analyst Katy Huberty from Morgan Stanley said she expects a record December quarter print for the tech giant. Optimism is rising that major technology companies will impress Wall Street when they hand in earnings reports next week. Apple, Microsoft and Facebook have all risen at least 5% this week ahead of their quarterly results.
Equities closed at record highs in the previous session as President Joe Biden was sworn into office, ushering in hope that an improved vaccine rollout will ensure a smoother and faster reopening. Some on Wall Street are optimistic that Biden’s plans to combat the pandemic will give the stock market a further boost through 2021.
Biden released details of his Covid plan on his first full day in office, including 10 executive orders and his intent to use the Defense Production Act to ramp up protective equipment production. Biden will seek to accelerate the rollout of vaccines by providing more local and state funding, creating more vaccination sites and launching a national education campaign.
“We see the pace of vaccinations as a key driver of equities through 2021, similar to how shifts in mobility and Covid cases drove equities in 2020,” Keith Parker, head of equity strategy at UBS, said in a note. “Removing bottlenecks for administering doses would present an upside case near-term.”
Still, the big run-up also lifted valuations to historically high levels, making investors cautious about a potential pullback ahead. The S&P 500 has gained 2.8% so far in the new year, and the tech-heavy Nasdaq has climbed nearly 5% during the same period.
The S&P 500 is currently trading at 22.8 times forward earnings, near levels during the 2000 dotcom bubble, according to FactSet. The broad equity benchmark is also 16% above the 200-day moving average, twice the normal levels even in bull markets.
“The most recent rally in the stock market should see (at least) a sideways breather over the very-near-term,” Matt Maley, chief market strategist at Miller Tabak, said in an email. “The breadth in the market place was quite poor during the rally.”
Major U.S. airline United fell 6.4% after missing on the top and bottom lines of its quarterly earnings. The carrier warned sales would continue to suffer in the early part of 2021 as the coronavirus pandemic drags on.
Thursday’s action came after a better-than-expected reading on jobless claims. First-time claims for unemployment insurance totaled 900,000 for the week ended Jan. 16, lower than an estimate of 925,000 according to economists surveyed by Dow Jones.
Biden was sworn in as the 46th U.S. president on Wednesday, succeeding former President Donald Trump. Investors are watching if Biden can get his proposed $1.9 trillion coronavirus relief bill through Congress. House Speaker Nancy Pelosi said Thursday the chamber is ready to pass the bill in the first week of February.
