Nasdaq Surges 2.7% As Strong Earnings/US Data Boost Growth Stocks; PayPal Gains 9.0%

Key Points

  • The S&P 500 and Nasdaq 100 both broke out to fresh multi-week highs.
  • Stocks were boosted by a combination of strong earnings, robust US data and softer Fed commentary.
  • Growth stocks led the charge, with the Information Technology, Communication Services and Consumer Discretionary S&P 500 GICS sectors outperforming.

S&P 500, Nasdaq 100 Break Higher Amid Strong Earnings, Robust US Data, Fed Commentary

The S&P 500 and Nasdaq 100 indices broke out to fresh multi-week highs on Wednesday after strong US ISM Services PMI data for July and Factory Orders figures for June spurred optimism that the US economy is, for now, not in recession and on a barrage of strong earnings report. Stocks also found comfort in remarks from Fed policymaker Mary Daly, who played down the prospect of another 75 bps rate hike from the central bank in September, despite also pushing back (as other Fed policymakers have also done in the past two days) against excessively dovish market expectations for the Fed to begin cutting interest rates in early 2023.

That proved a bullish cocktail for equities, with the S&P 500 index rallying 1.6% to push above 4,150 for the first time since early June and leave its 100-Day Moving Average just under 4,120 in the dust. Bulls continue to target a test of early June highs near 4,180. The Nasdaq 100 index, meanwhile, surged 2.7% to hit its highest since early May in the 13,200s, while the Dow gained 1.3% to move back above its 100DMA just above 32,700.

Growth/Big Tech Stocks Lead the Way

“Growth” stocks, including some of the largest names like Apple, Microsoft, Alphabet, Amazon and Meta Platforms led the market rally on Wednesday. “An economy that is not falling into recession but is not roaring higher at this time would have you shift away from value stocks into growth,” said Bokeh Capital Management’s chief investment officer Kim Forrest.

A near 10% surge higher in PayPal Holding’s share price after the payment tech firm lifted its profit forecast for the year and disclosed that activist investor Elliot Management had built up a $2 billion stake helped spur the gains in growth stocks. The growth stocks dense Information Technology, Communication Services and Consumer Discretionary S&P 500 GICS sectors were the best performers on Wednesday, each gaining between 2.5%-3.0% on the day.

In terms of other major stocks to have reported earnings; CVS Health, the largest US pharmaceutical chain, jumped after raising its 2022 profit forecast, Starbucks rallied after beating bottom-line analyst expectations in Q2 amid robust demand for its coffee in the US, while Moderna surged following the announcement of a $3 billion share buyback scheme.