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U.S. equities opened mixed on Thursday, fluctuating between gains and losses, yet they are trending towards record highs. This rise comes despite ongoing concerns over tariff expansions by President Donald Trump, who recently added Brazil to the list of countries facing tariffs. The measures now include copper and various products, with more specifics expected for pharmaceuticals and semiconductors.
The broader market’s upward momentum continues, having surpassed the highs seen in February. According to Adam Turnquist, Chief Technical Strategist at LPL Financial, the market’s rally has been concentrated among a few major players. Companies like Nvidia (NVDA), Microsoft (MSFT), Meta Platforms (META), Broadcom (AVGO), and Amazon.com (AMZN) have contributed significantly to the 5.2% total return for the S&P 500.
While the current market dynamics show a bullish trend in leadership, Turnquist notes that the rally is narrow and may face challenges. Daniel Skelly, who leads the Wealth Management Market Research & Strategy Team at Morgan Stanley, emphasizes that with the Federal Reserve on pause and geopolitical risks increasing, the S&P may encounter hurdles in extending its rally from the lows observed in April.
Sector Performance and Economic Indicators
The outlook varies across sectors. Industrial stocks are nearing all-time highs, driven primarily by infrastructure spending aimed at supporting the burgeoning artificial intelligence sector and potential reshoring activities. Skelly also points out that defensive sectors, including health care and consumer staples, may outperform consumer discretionary stocks in the upcoming months due to lower tariff risks.
By the end of the trading day, the Nasdaq Composite closed slightly higher at 20,630, up 0.1%. The S&P 500 rose by 0.3% to 6,280, while the Dow Jones Industrial Average gained 0.4%, finishing at 44,650.
Delta Air Lines also made headlines on Thursday, with its stock soaring 12% after the company reported second-quarter earnings that exceeded expectations. Delta recorded earnings of $2.10 per share on revenue of $15.5 billion, surpassing consensus estimates of $2.06 per share. CEO Ed Bastian expressed confidence in the airline’s performance, stating that they are restoring full-year guidance, projecting earnings per share between $5.25 and $6.25.
The airline’s robust results came as it reinstated its full-year guidance, signaling a strong recovery amidst the ongoing economic fluctuations. The market reacted positively, with Delta shares reaching as high as $57.93 in pre-market trading.
Jobless Claims and Market Sentiment
Investor attention remains focused on economic indicators, particularly the weekly initial jobless claims report. The Department of Labor reported that initial claims fell by 5,000 to 227,000 for the week ending July 5, with the previous week’s figures revised downwards. The four-week moving average decreased to 235,500, indicating a slight improvement in labor market conditions.
Jefferies Chief U.S. Economist Thomas Simons explained that businesses have managed to preserve margins by reducing labor costs through attrition and part-time employment rather than resorting to mass layoffs. He cautioned, however, that this strategy may not be sustainable in the long run.
In contrast, CrowdStrike’s stock faced a downturn, dropping 5.1% on Thursday despite the company’s strong growth potential. CFRA Research analyst Janice Quek downgraded her rating on CrowdStrike from Buy to Hold, but raised the 12-month target price from $517 to $555. Despite a solid business model and prospects, Quek cited valuation concerns, noting that the stock’s forward enterprise value-to-sales ratio is currently at a three-year high.
Overall, the balancing act between positive earnings reports and tariff-related uncertainties continues to shape market sentiment as investors navigate the complexities of the current economic landscape.
