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The Dow climbed 0.88%, while the S&P 500 gained 1.17%, ending the session above 5,300 for the first time. The tech-related Nasdaq Composite closed higher by 1.40%.
In after-hours trading, shares of Alphabet dropped more than 5%, while Microsoft slipped 2% after the tech giants, part of the Magnificent Seven posted quarterly earnings. However, both companies achieved on both top and bottom lines. However, advertising revenue for Alphabet came short of analysts’ expectations.
The tech sector powered the market rally from 2023 into 2024 and is now trading at a relatively high valuation of nearly 29 times its 2024 earnings, according to recent figures. Investors will need to see earnings expansion in order for the tech companies to be able to maintain their elevated levels.
Results were good but not good enough according to Wall Street as stocks were priced for perfection and that wasn’t delivered.
Even though the results were better-than-expected, investors are likely selling because they just want to take some money off the table.
Absolute perfection comes at a price on Wall Street.
This was the first time the index closed above its previous high set January 3rd 2022. The rally was driven by strong earnings from the magnificent 7 tech giants such as Nvidia and Microsoft.
The expectation of a Fed interest rate cut later this year also helped the S&P500 break new ground.
October is a special month in the stock market for several reasons. It is the month when some of the most spectacular market crashes have occurred, such as in 1929 and 1987.
However, it is also a month that has historically performed well on average, with a 0.6% price gain for the Dow Jones Industrial Average from 1928 to 2022.
The month of October also marks the beginning of a seasonal pattern that favours stocks, as the fourth quarter and the winter months tend to see strong rallies. The ‘Santa’ rally may also visit.
However, October can also be a volatile month, with significant swings in both directions. It is the only month where all major indices have recorded losses of at least 17% (in 1987 and 2008), but also the month where the S&P 500 and the Dow Jones Industrial Average have posted their highest percentage gains of any month (in 1974 and 2022).
Therefore, investors should be prepared for potential turbulence and seek professional advice to navigate the market. Do your research!
RESEARCH! RESEARCH! RESEARCH!
Additionally, October may face some special factors that could affect the market performance this year, such as the ongoing strike action, the rising inflation and interest rates, and the political uncertainty in the U.S. over the debt ceiling and government spending. These factors could create headwinds or even opportunities for different sectors and industries, depending on how they are resolved.
In summary, October is a month that has a mixed reputation in the stock market, with both risks and rewards. Investors should be aware of the historical trends and the current events that could influence the market direction.
