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Optimism on the debt ceiling sent equities higher with Nvidia’s rosy earnings

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The Nasdaq had a good run this year with the robust stock performance of NVDA; the index climbed almost 2% on Thursday. The good run by Nvda is also pushing other names of the same industry higher. We have seen TSM and AMAT all rising sharply.

Semiconductors and Chips push the index higher.

It is another strong boost for the technology counters as Nasdaq is up around 21% for the year. With the rise of AI hype, it is thought to help in spurring new rounds of earnings growth, and buyers are keen to bid the index higher on the premise of the accelerated earnings power of major technology firms in the AI sphere.

Is Nasdaq valuation rich?

For now, investors are eyeing Nasdaq at the critical resistance level of 13,000 to 13,200. On a TA level, it does look stretched, given the recent swift run-up. On the FA level, the Nasdaq’s on aggregate is trading around its forward PE ratio of 26 times, which is around 1.5 times its future expected growth rate.

Mapping this ratio to S&P 500’s of 2 times its expected EPS growth means that technology investors are paying lesser for earnings growth. If you need a reason, that could be why Nasdaq is now seen as both a haven and a favourite.

Nonetheless, as always, be cautiously optimistic.

What’s on the menu today?

We have important economic data on the inflation front.

8.30 pm: Core PCE Price Index (MoM) , Durable Goods Orders (MoM), PCE Price Index (YoY), Personal Income (MoM)
10 pm : Michigan Consumer Expectations (may) , Michigan Consumer Sentiment (May)

It is 26 May, Friday 8.55 am in Singapore and 8.55 pm in New York. We have offloaded our Nasdaq positions, but it is a tiny hedging gain as we sold call options that cap our gain before Nvidia euphoria rise. We are still holding many S&P 500 and are exploring for opportunities to pare down too.

It is a wet morning. Do stay safe on your journey to work and school. See you today in our next trading live update.