Dow Jones futures up 75pts, Nasdaq confidently above 11,000 points

‘There remains the sense in the market that the lull in the VIX might be the calm before the storm, with August seasonally a time of considerable volatility for US stocks,’ said IG market analyst, Kyle Rodda.

Facebook, Amazon, Apple and Google share prices continue to dominate news flow

Though equities have rallied from their March-lows, many key benchmarks – such as the Dow Jones, S&P 500, the ASX 200, the DAX and the FTSE 100 – remain some ways off the levels they achieved in January.

The exception to this rule is the Nasdaq 100 – which has traded above the 11,000 point level since Monday.

Tellingly, the tech-heavy Nasdaq not only trades well off the lows it recorded in March, but currently trades at fresh all-time highs – finishing out Wednesday’s session at the 11,125.44 point level.

This comes off the back of a high profile week of quarterly earnings reports, with a number of the FAANG stocks defying analysts’ revenue and earnings estimates, despite a plethora of economic headwinds.

Heading into these results – much had been made about the dominance of the FAANG stocks – which currently make up a significant portion of US markets. For reference, Facebook, Apple, Amazon, and Google have a combined market capitalisation of approximately US$5.2 trillion.

Looking at the broad strokes of these tech results:

  • Facebook reported Q2 revenue of US$18,321 million, up 10%, against diluted earnings per share of $1.80, up 98%
  • Apple reported Q3 revenue of US$59.7 billion, up 11%, against diluted earnings per share of $2.58, up 18%
  • Amazon reported Q2 net sales of US$88.9 billion, up a staggering 40%, against diluted earnings per share of US$10.30
  • Alphabet (Google) reported Q2 revenues of US$38,297 million, against diluted earnings per share of $10.13

Beyond these results, big tech remains overwhelmingly liked by sell-side analysts, with Facebook, Amazon and Google all commanding Buy ratings, on average, according to MarketWatch. By comparison, Apple has an Overweight rating, on average, also according to MarketWatch.

As we head into Thursday’s session, Nasdaq futures are currently suggesting the market will open flat.

Dow Jones futures and volatility at a glance

By comparison to the Nasdaq, the Dow Jones (DJIA) has failed to break above the levels it recorded in January, and remains down around ~5% year-to-date, last trading at 27,201.52 points.

On Wednesday, the best performing Dow constituents were Walt Disney, Boeing, and Raytheon Technologies; while the worst performing were Walmart, Cisco, and Verizon.

Reflecting on recent market volatility, IG market analyst, Kyle Rodda, argued that: ‘The market’s positive bias is no more evident in the US VIX index. It closed at the 23-level overnight, having briefly dipped into the 22-level, to trade at its lowest since the beginning of the virus panic at the end of February.’

Mr Rodda finished by noting that ‘there remains the sense in the market that the lull in the VIX might be the calm before the storm, with August seasonally a time of considerable volatility for US stocks.’

Dow Jones futures traded 75 points higher at the time of writing, suggesting the key US benchmark would open slightly higher on Thursday.

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