The Nasdaq Composite gained on Tuesday, driven by Nvidia shares, as investors downplayed mounting geopolitical tensions between Ukraine and Russia. The index rose 1.04% to finish at 18,987.47, while the S&P 500 gained 0.4% to end at 5,916.98. The Dow dipped 120.66 points, or 0.28%, to settle at 43,268.94.
One bright spot was technology stocks, with Nvidia gaining nearly 5% ahead of its closely watched earnings report on Wednesday. Amazon added 3% after posting strong quarterly results and hiking its outlook based on strong discretionary spending. Tesla rose 2%, bringing its month-to-date rally to 38%, and Meta Platforms also added more than 1%.
“The underlying trend for the market is positive,” said Keith Lerner, Truist’s co-chief investment officer. “The geopolitical stuff — that’s certainly a risk — but you’re seeing some modest selling. I’m not seeing panic.
It’s more of a digestion of the recent gains.”
The market pressure began overnight after Russian President Vladimir Putin warned the U.S. that the threshold for the use of nuclear weapons had lowered. The warning came after President Joe Biden allowed Ukraine to use U.S. weapons to strike inside Russia. The tension escalated further when Ukraine hit the Russian border region Bryansk with U.S.-made missiles, confirmed by both U.S. and Ukrainian officials.
The attack targeted an ammunition warehouse. “Rising geopolitical tensions have been and continue to be a risk for markets,” said Gaurav Mallik, chief investment officer at Pallas Capital Advisors. “The combination of Russia ratcheting up its war rhetoric and uncertainty about how the incoming U.S. presidential administration will respond is a recipe for stock market volatility.”
Treasury prices increased as investors moved into safe havens, driving yields lower.
Gold futures also gained.
Nvidia boosts Nasdaq amid tensions
The CBOE Volatility Index, or VIX, spiked to around 16, reflecting heightened market fear.
A sustainable shift toward small-cap leadership seems unlikely, according to LPL Financial. “Small cap stocks pared most of their post-election rally last week as overbought conditions faced a backup in bond yields,” LPL chief technical strategist Adam Turnquist wrote in a note to clients on Tuesday. The Russell 2000 Index of small-cap stocks is trading at 28.4 times its blended-forward earnings per share estimates, above its 10-year average multiple.
RBC Wealth Management recommends market participants keep a close watch on the 10-year Treasury yield and the U.S. dollar. “While investors and the media focus on the implications of the US election and cabinet postings, we continue to view the trend in the US yield and US dollar as the more important macro catalysts for equity markets,” technical strategist Robert Sluymer wrote on Tuesday. Despite the 10-year Treasury yield jumping beyond initial expectations to 4.3%, Sluymer believes it should “stall” at 4.5%, allowing for further equity upside through the rest of 2024.
Sluymer suggests staying invested in equities tied to growth and cyclicals through the end of the year, while also noting opportunities for tactical investors in utilities, real estate investment trusts, and some staples following recent pullbacks. With the 10-year Treasury yield nearing the 4.5% level, Strategas warns that higher yields might create issues for the bull market. Chief investment strategist Jason DeSena Trennert noted that two of the last four “get-your-attention” market sell-offs since the start of the bull market in October 2022 occurred when the 10-year Treasury yield rose above 4.5%.
Shares of Super Micro Computer surged over 31% after the artificial intelligence server maker submitted a new plan to maintain its Nasdaq listing. The company announced it had hired BDO for the role after Ernst & Young stepped down in October. Piper Sandler increased its price target for Reddit, citing Google’s efforts to monetize searches related to the platform.
The stock rose more than 3% with the new target now implying about 16% upside. Reddit shares have soared over 108% in the past six months and around 138% over the past three months. State Street and Bridgewater announced a strategic relationship on Tuesday, combining one of the biggest ETF providers with an asset management firm specializing in alternative strategies.
