The Market News Today: Markets Await Tech Earnings Amid Ongoing Sector Rotation

Market Rotation Hits Tech; Investors Eye Broader Economic Signals

U.S. stock futures edged up Thursday following the Nasdaq’s worst day since 2022, as investors shift from tech giants to broader market opportunities. The Dow hit a record high above 41,000, while the Nasdaq and S&P 500 declined. This rotation reflects growing optimism about potential rate cuts and a desire for market breadth. However, concerns persist about an economic slowdown. After-hours trading saw Discover Financial rise on strong earnings, while Beyond Meat fell on restructuring news. Analysts caution that the current “soft landing” may not last.

Small-Cap Stocks Surge as Investors Rotate from Tech Giants

Small-cap stocks are experiencing a significant rally, with the Russell 2000 index gaining over 1% for five consecutive sessions. This shift is driven by investors rotating out of overvalued tech giants and expectations of potential policy changes. Notable small-cap performers include Caribou Biosciences, Hovnanian Enterprises, and Hippo Holdings. Historical data suggests this trend may continue in the near term. However, sustainability depends on upcoming earnings reports and economic indicators. The Russell 2000’s total market value of $2.7 trillion still lags behind individual tech giants, indicating potential for further growth.

TSMC Beats Expectations as AI Chip Demand Surges, Supply Remains Tight

Taiwan Semiconductor Manufacturing Company (TSMC) exceeded revenue and profit expectations in Q2, driven by strong demand for advanced chips used in AI applications. The company reported a 40.1% year-over-year increase in revenue to NT$673.51 billion. TSMC expects continued growth, projecting Q3 revenue between $22.4-23.2 billion. CEO C.C. Wei warned of tight chip supply through 2025, with the company working to increase capacity. TSMC plans to begin mass production of 2-nanometer chips in 2025 and expects 2024 to be a strong growth year.

Netflix Earnings Preview: Strong Growth Expected as Streaming Giant Expands

Netflix is set to report its second-quarter earnings after the close on Thursday, with analysts anticipating continued strong performance following impressive Q1 results. Wall Street expects earnings of $4.39 per share, up 33.4% year-over-year, on revenue of $8.8 billion, a 7.6% increase. Argus Research maintains a Buy rating with an increased price target of $767, citing potential growth from Netflix’s expansion into live sports programming. The company’s recent NFL deal is seen as particularly attractive to advertisers on its new lower-cost ad-supported tier, potentially driving revenue growth.

ECB Faces Wage Growth Challenge as Inflation Battle Enters New Phase

The European Central Bank (ECB) is grappling with wage growth as the main obstacle to achieving its 2% inflation target, according to analysts. With disinflation from lower energy prices and supply chain normalization largely complete, the focus shifts to labor costs. The ECB must navigate policy decisions amid heightened geopolitical and political uncertainties, including upcoming elections. While a September rate cut is anticipated as inflation is expected to approach the target, the ECB will likely require significant wage growth deceleration before year-end to consider further easing measures.