Nasdaq Scales Its All-Time High Ahead of Crucial Earnings Week

The tech-heavy Nasdaq Composite Index rose to its record high on Friday led by continued gains in Tesla whose Q3 earnings release triggered a massive buying spree in the stock. Notably, while both the Dow Jones and S&P 500 Index have been regularly hitting record highs, the Nasdaq has achieved the feat for the first time since July and comes ahead of the crucial earnings week.

Meanwhile, while the Nasdaq rose 0.2% during the week to extend its winning streak to seven weeks, both the S&P 500 and Dow Jones ended their six-week bull run to close in the red. Bond yields have risen from their lows which is leading to some apprehensions. However, the Nasdaq managed to deliver a winning weak despite the pessimism, mostly due to Tesla which soared almost 22% on Thursday to have its biggest gain in over a decade.

Nasdaq Rose to a Record High on Friday

While the Elon Musk-run company missed revenue estimates, it easily beat on the bottomline, thanks to higher sales of regulatory credits. Tesla also reassured markets about its 2024 delivery outlook and emphasized, “Despite ongoing macroeconomic conditions, we expect to achieve slight growth in vehicle deliveries in 2024.” The EV maker’s deliveries fell YoY in the first two quarters of the year and while they did rise in Q3, its cumulative deliveries in the first nine months of the year are still lower than the corresponding period last year.

During the earnings call, Musk was quite upbeat on the 2025 delivery outlook and said, “Something like 20% to 30% growth next year is my best guess.” While that guidance at midpoint is half of the 50% long-term delivery guidance that Musk once touted, its nonetheless encouraging considering the current state of the EV industry.

Tech Earnings Next Week

Next week, tech giants like Apple, Alphabet, Amazon, Microsoft, and Meta Platforms will release their quarterly earnings. Notably, while the Nasdaq has hit its record high, names like Alphabet, Microsoft, and Amazon are still considerably below their 2024 highs and the upcoming earnings would be an opportunity for them to set the narrative right. Also, the rally in outperformers like Meta would be tested as markets would weigh the price action against the earnings.

Nasdaq Could be Volatile Amid a Flurry of Earnings and Data Releases

Commenting on the upcoming week, Mark Malek, investment chief at Siebert said, “I sort of refer to this period that we’re in right now as like a strange brew.” He added, “It’ll either be a great week or a terrible week, based on how those things play out.”

According to Malek, “Though we try to find a new path to take us in a new direction, what we’re finding is that all roads keep leading back to the Mag Seven.” Incidentally, five of the “Magnificent 7” stocks are set to report their earnings next week, and these mega-cap companies’ earnings would drive the Nasdaq.

Analyst opinion on Big Tech earnings is a bit mixed, especially on Apple which is the biggest constituent of Nasdaq. In its note, Morgan Stanley said, “While we are yet to see any iPhone build cuts, our below-consensus Dec Q forecasts reflect conservatism amidst mixed iPhone data points. … We expect Apple to post a strong Sept Q top- and bottom-line beat. … Near-term dynamics are unlikely to change bulls’ or bears’ views on AAPL or Apple Intelligence, so we think any stock underperformance will be short lived.”

However, some analysts are circumspect about Apple heading into its earnings and KeyBanc downgraded the stock citing weakness in iPhone 16 sales.

Along with tech earnings, we also have a flurry of data points including the October jobs report, September personal consumption expenditures (PCE), and preliminary Q3 GDP print lined up for the next week.

US Elections Could Lead to Volatility

While the Nasdaq is expected to be volatile next week, the following week could also see heightened volatility around the election results. Trump for instance has vowed to increase tariffs, including on China which is the country’s biggest trading partner. Incidentally, the Nasdaq crashed in Q4 2018 when the US-China trade war aggravated in Trump’s first tenure.

Chipmakers and names like Apple which have a significant exposure to China were among the worst affected back then.

Could the Nasdaq Bull Market Continue in 2025?

While there are valuation concerns, DataTrek co-founders Nicholas Colas and Jessica Rabe see the Nasdaq bull market continuing into 2025 also, citing historical data. Citing them, CNBC reported, “The average third year of a bull market has brought an increase of just 4.4% for the tech-heavy Nasdaq, the firm’s data shows. But that rally jumps to 13% when looking only at years without major shocks. In some instances, investors saw gains of as much as 20% in those third years.”

Meanwhile, there is another school of thought and Goldman Sachs sees US stocks delivering an annualized return of a mere 3% over the next decade.

For now, though, Nasdaq has finally broken above its July highs, and all eyes will be on tech earnings next week as markets look for confirmation that the rally is backed by commensurate growth in corporate earnings.