In the latest trading session, the S&P 500 reached new heights, showing strong momentum as the relative strength index (RSI) climbed to 68. Close to the overbought threshold of 70, the RSI reflects a market poised for potential fluctuations. It’s important to note that being in the overbought category does not automatically suggest an imminent reversal. Analyst Rob Sechan from NewEdge Wealth highlighted on CNBC’s “Closing Bell” that half of the S&P 500 companies are trading above their 50-day moving averages, indicating a potential vulnerability in the market should investor sentiment shift.
In addition to the S&P 500, other major indices followed suit. Both the Nasdaq Composite and Nasdaq 100 also marked new highs, with their RSIs above 70, suggesting rapid gains. The Dow Jones Industrial Average saw an RSI of 66.65. Among sectors, S&P industrials, communication services, and technology likewise achieved new peaks, with tech, in particular, with an RSI of 74.5, indicating overbought conditions. In contrast, the S&P Real Estate Sector remains 9.6% below its November high, while other sectors like energy and materials lag slightly behind as well.
The market buzz surrounding major tech companies intensified as earnings reports were released. Meta reported results that exceeded expectations but revealed a substantial tax charge of nearly $16 billion and projected fourth-quarter revenue ranging from $56 billion to $59 billion, surpassing analyst forecasts. Despite this, shares fell approximately 7% in after-hours trading, still close to its August high.
Microsoft also beat estimates with 40% growth in its Azure cloud division, yet its shares dropped around 4% in extended trading. It remains less than 3% away from its July high. Alphabet, on the other hand, recorded a positive earnings report, announcing an increase in capital expenditures up to $93 billion for the year, with growth in its cloud and AI divisions. Its shares surged by about 6% post-report, hitting a new high.
Attention now shifts to Amazon and Apple, both set to report earnings after the bell on Thursday. Amazon’s stock has been flat over the past three months since its last report, while remaining 5% off its February high. Apple has fared better with a notable 28% increase since its last earnings report, recently reaching a new high.
Tariff discussions surfaced prominently, especially in relation to Caterpillar, which revised its tariff expectations upward to between $1.6 billion and $1.75 billion for the year. Despite the prediction of a hit to profits, Caterpillar’s stock enjoyed significant gains, bolstering over 61% year to date, marking its best trading day since 2009. Conversely, Brinker International reported rising commodity costs due to tariffs, resulting in a 7% stock decline, with shares dropping over 30% in the past four months.
Earnings from Estee Lauder are anticipated before the market opens on Thursday, with prior warnings of a $100 million impact from tariffs projected for fiscal 2026. Despite this, the company’s stock has appreciated more than 8% since its last earnings announcement. Similarly, Ulta Beauty and E.l.f. Beauty have seen positive performance trends year to date, with significant gains since early April 2023. The market remains poised for further reactions as more earnings reports roll out and tariff implications become clearer, potentially influencing market trends in the near future.
