Nasdaq Composite hits record high amid positive earnings

The U.S. stock market is enjoying a bullish rally today, adding to the rally that began on Monday, spurred by impressive earnings reports from Wall Street companies. Futures linked to the Nasdaq 100 are up 2.32%, those linked to the Dow Jones are up 1.83% and those linked to the S&P 500 Index are up 2.02% Tuesday morning.

Market reaction to new earnings reports

The performance of futures mirrors what’s happening on the major indexes, with the Nasdaq enjoying its best daily rally since July. The tech-heavy index is up 2.33 percent, or 249.22 points, at 10,925.02. The S&P 500 added 79.67 points atop a 2.33 percent gain to 3,757.62.

The Dow Jones is also in positive territory with a 2.10% gain at 30,818.26.

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The growth seen reflects investor sentiment regarding entities like Goldman Sachs, which reported better-than-expected revenue. According to the Goldman Sachs report, its revenue was $11.98 billion.

Like other major banking firms, the poor performance of the investment bank was offset by growth in other areas such as trading and equities.

Overall, the majority of firms that released their performance reports showed that the economic meltdown was born out of runaway inflation, and that the Federal Reserve’s monetary policies aimed at mitigating it did not prove as devastating to business as expected.

3Q and 4Q earnings should confirm that fundamentals remain anchored in the resilient labor market and reopening Covid. Equity valuation will likely remain tied to global central bank rhetoric and rates, which are becoming less negative. As a result, we believe equities are poised for an upside run through the end of the year thanks to resilient earnings in 2H22, weak equity positioning, very negative sentiment, and a more reasonable valuation” said Dubravko Lakos-Bujas, head of global macro research at JPMorgan, in a note to clients, adding that “next year, however, we expect a more challenging earnings environment relative to current expectations“.

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The Nasdaq Composite and the stock market are not out of the woods

While it is very common for investors to assume that steady growth in the stock market is a condition for a more prolonged bullish rally, it is worth noting that the sector is not out of the woods yet.

With just a few weeks left in the year, the feds will be watching inflation and will likely continue their aggressive hikes until the 2-4% range is reached. For now, regulators and the private sector will continue to monitor the performance of companies across sectors. This will shape strategies, operating costs and other business decisions that will help companies stay afloat in the medium to long term.

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