Wall Street Rallies as Investors Return to Megacap Growth Stocks
On Monday, Wall Street’s major benchmarks closed higher as investors pivoted back to megacap growth stocks. This shift helped both the S&P 500 and Nasdaq Composite recover from their worst weekly performance since April. The Dow Jones Industrial Average also moved back into positive territory, breaking a two-session losing streak following an all-time closing high last Wednesday.
Tech Sector Revival
Key megacap stocks such as Alphabet, Meta Platforms, and Tesla experienced significant gains, advancing between 2.2% and 5.1% after previously dragging the market down last week. Nvidia also saw a substantial rise of 4.8%, buoyed by a Reuters report that the company is developing a version of its new flagship AI chips for the Chinese market that complies with current U.S. export controls.
The Information Technology index climbed 2%, leading the sectoral gainers and ending a four-day losing streak. Jason Pride, Chief of Investment Strategy & Research at Glenmede, attributed the day’s gains to a rebound from last week’s selling rather than new market-moving developments.
Presidential Race Impact
Another major focus for traders was the reassessment of the presidential race following U.S. President Joe Biden’s withdrawal and endorsement of Vice President Kamala Harris for the upcoming November election. Biden’s exit from the race prompted investors to reconsider their positions, particularly concerning the potential economic impact of a Republican victory under Donald Trump, which is anticipated to increase fiscal and inflationary pressures.
PredictIt, an online betting site, reflected this shift in sentiment, showing a slight decline in the odds for a Trump victory, while Harris’s chances increased. Trump-linked stocks had mixed reactions; Trump Media & Technology Group fell by 0.8%, whereas software firm Phunware gained 4%.
Investors are now keenly watching for who will join Harris on the Democratic ticket and whether she will diverge from Biden’s platform. This political uncertainty, combined with ongoing concerns about quarterly earnings, particularly from Alphabet and Tesla, is likely to keep markets volatile.
Earnings Season and Market Sentiment
The upcoming earnings reports from Alphabet and Tesla, part of the so-called “Magnificent Seven” group of high-momentum stocks, are expected to test the sustainability of the recent rally in these top-tier tech companies. Investors are also contemplating whether there will be a shift towards smaller-cap stocks and underperforming sectors, as suggested by Glenmede’s Pride, who noted a market trend towards favoring smaller-cap stocks amid expectations of faster rate cuts.
Market Performance
The S&P 500 gained 59.41 points, or 1.08%, closing at 5,564.41 points. The Nasdaq Composite climbed 280.63 points, or 1.58%, to finish at 18,007.57. Meanwhile, the Dow Jones Industrial Average rose 127.91 points, or 0.32%, ending the day at 40,415.44.
Sector and Stock Highlights
Several notable stock movements included cybersecurity firm CrowdStrike, which slumped 13.5% following a software update that contributed to a global tech outage on Friday. Delta Air Lines dropped 3.5% after canceling over 600 flights due to operational struggles post-outage. Verizon Communications fell 6.1% after missing its second-quarter revenue targets. Conversely, toy maker Mattel Inc jumped 15.1% on news of a potential acquisition offer from buyout firm L Catterton, as reported by Reuters.
Overall, trading volume on U.S. exchanges was 10.95 billion shares, slightly below the 11.37 billion average over the past 20 trading days.
The market’s ability to rebound from last week’s losses demonstrates resilience, though investor focus will remain on upcoming earnings reports and the evolving political landscape, both of which are poised to shape market sentiment in the near term.