The Dow Jones Industrial Average has achieved its longest winning streak in six years, driven by a shift in investor focus away from the technology sector. With a flurry of earnings reports and a highly anticipated Federal Reserve meeting, investors are broadening their investment strategies to seek better bargains in other parts of the market.
This shift comes as investors await the earnings reports of major tech companies like Microsoft, Google-owner Alphabet, and Meta Platforms, which will determine whether their stocks are justifiably valued at their current levels. The tech-heavy Nasdaq Composite Index has outperformed other indexes this year, surging by 34.3% as investors placed bets on rate-sensitive megacap growth companies and advancements in artificial intelligence. However, as investors hunt for bargains, the Nasdaq has seen slower growth compared to non-tech stocks and sectors like energy and banking.
Boosting the Dow’s winning streak, Chevron’s impressive preliminary quarterly earnings have helped drive the index to its longest stretch of gains since February 2017. Despite concerns over declining second-quarter earnings, investors seem optimistic about a potential soft landing and a more dovish Federal Reserve, prompting sidelined cash to flow back into the stock market.
The Federal Reserve’s policy-making meeting, scheduled for Wednesday, is expected to result in a 25 basis point interest rate hike. However, most economists polled by Reuters believe this will be the final rate hike of the current tightening cycle, as recent data has shown signs of disinflation.
In Monday’s trading session, the Dow Jones Industrial Average rose by 0.52% or 183.55 points to reach 35,411.24. The S&P 500 also gained, increasing by 0.40% or 18.3 points to 4,554.64, while the Nasdaq Composite added 0.19% or 26.06 points to close at 14,058.87.
The positive momentum was reflected across the majority of S&P 500 sectors, particularly energy stocks, which experienced notable gains. Additionally, toymaker Mattel saw a rise of 1.8% after the successful domestic debut of its Barbie movie, which set a record as the biggest opening of 2023. Meanwhile, AMC Entertainment’s stock surged by 32.9% after a judge blocked the theater chain’s stock conversion plan, preventing potential dilution of investors’ holdings.
U.S.-listed shares of Chinese companies, such as Alibaba and JD.com, also saw increases, rising by 4.5% and 3.5% respectively. This was attributed to the economic policy adjustments announced by China’s top leaders, which aimed to boost domestic demand.
In a move to address over-concentration in the benchmark, exchange operator Nasdaq has reduced the weight of several companies that make up a significant portion of the Nasdaq 100.
Although a recent survey indicated a slowdown in July U.S. business activity, with decelerating service-sector growth, the markets appeared to shrug off these concerns. Instead, investors are focusing on the potential soft landing and the dovish stance of the Federal Reserve.
Overall, this week’s market surge and the Dow’s impressive winning streak mark a shift in investor sentiment towards sectors beyond technology. As earnings reports continue to unfold and the Federal Reserve makes its decision, investors will closely monitor market movements and seek opportunities in various areas of the market.
