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Smart News - US majors post fresh record highs


Market Update

US majors post fresh record highs

This last full week of August got off to a storming start as both the S&P 500 and Nasdaq 100 established fresh record highs. These two US indices have been particularly strong this year as they both contain a large proportion of the giant US tech stocks. In contrast, the old school Dow 30 Industrial Average and the wider-ranging US mid-cap Russell 2000 have lagged in performance. The former is still around 4.5% below its all-time high from mid-February this year while the latter is adrift by over 10% from its own all-time high hit back in September 2018. Some investors consider this fact as a big warning sign. They insist that the underperformance of the broad-based Russell shows the lack of breadth in the stock market’s rally since March. The biggest and most impressive gains continue to concentrate in a handful of tech heavyweights, namely Alphabet (Google’s parent company), Amazon, Apple, Facebook and Microsoft. Last week, Apple jumped more than 8% ahead of its 4-for-1 stock split, bringing its 2020 gains to nearly 70%. Of course, there have been other corporations that have also seen their stocks fly higher this year. These tend to be the glamourous companies which see plenty of interest from smaller investors. Tesla is an obvious example which, like Apple, is splitting its stock next week. A stock split, which in Tesla’s case will be 5-for-1, greatly increases trading interest as it makes the stock cheaper, more accessible and less volatile. This move saw Tesla’s share price soar above $2,000 at the end of last week. This means that its planned stock split will, should the price stay at $2,000, see each share priced at $400. That would mean our Tesla Mini-Market would be a tenth of this, making it more accessible, although the usual risks of leveraged trading still apply. As a side note, we have greatly increased the range of US companies now available to trade as ‘Minis’ and we’ll be sending an update of the full list very soon.

The second quarter earnings season is really winding down now. The general consensus is that it has been a success. While there were certainly some dire numbers reported, analysts had been frantically dialling down market expectations. In the end, most of the significant corporations managed to beat expectations, and this helped to bolster the overall market. On top of this, the current feeling is that the US has seen the worst of the coronavirus pandemic which means that the economy is on the mend. Time will tell if this proves to be unduly optimistic.

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This week our Smart News ‘Highlights’ feed focuses on a diverse handful of corporations set to report earnings. The feed includes the US electronics retailer Best Buy, the medical technology outfit, Medtronic, iconic multinational engineers, Rolls Royce, the US cloud data services and management company NetApp and worldwide advertising giant WPP. None of these are particularly glamourous companies, but their results and accompanying outlooks could really help investors in understanding what different businesses have had to go through this year, and what may be in store for the rest of it. In terms of the week’s main economic  events we have US Durable Goods on Wednesday and a speech from Federal Reserve Chair Jerome Powell on Thursday to open the annual Jackson Hole Economic Symposium.

For all the most up to date commentary on earnings and data releases, make sure you follow this week’s ‘Highlights’ feed. You can find it on our Smart News widget in the bottom right corner of the trading platform. If you’re not sure where it is, have a look at the vlog which accompanies this article. While it’s incredibly easy to build your own watchlist, our ‘Highlights’ feed makes it quick and easy to find all the key corporate and economic events in one place. This will help you keep a step ahead of the mainstream media.

 


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