Dow Makes More New Highs Despite AI Drag: Stock Market Today

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The Dow Jones Industrial Average and the S&P 500 gapped up to new all-time highs at the opening bell on Wednesday, lifted by relative quiet in the Middle East and solid data from the earnings calendar. Heavy exposure to hot AI-related names weighed on the Nasdaq Composite, as markets remain concerned about Big Tech's spending plans.

By the closing bell, the blue-chip Dow Jones Industrial Average had added 0.5% to 54,349, another new record closing high. But the broad-based S&P 500 was off 0.2% to 7,723 and the tech-heavy Nasdaq Composite was down 0.8% to 26,363.

All three remain near their respective peaks despite "no shortage of crosscurrents" to navigate, as LPL Financial Chief Technical Strategist Adam Turnquist observes. Turnquist cites the war in the Middle East and higher oil prices, as well as rising interest rates and shifting expectations about how the Federal Reserve will respond to inflation under Fed Chair Kevin Warsh.

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The front-month West Texas Intermediate crude oil futures contract was down 0.9% to $75.10 per barrel amid another pause in hostilities around the Strait of Hormuz. The 2-year Treasury yield ticked lower to 4.179% from 4.194% on Tuesday, while the 10-year was at 4.615% vs 4.627% and the 30-year dipped to 5.171% from 5.189%.

Markets are also looking forward to the release of the July jobs report before the opening bell on Friday, the main event on this week's economic calendar.

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Turnquist notes that semiconductor stocks traded down more than 20%, meeting the technical definition of a bear market while investors, traders and speculators "demanded evidence that rising capital expenditures were translating into meaningful returns" for the AI trade.

"Despite these challenges," he says, "the S&P 500 has remained remarkably resilient," with capital rotating out of communication services stocks, for example, and into healthcare stocks. As Turnquist concludes, "Fundamental conditions have also remained constructive, supported by an economy that continues to grow and corporate earnings."

Indeed: Amgen (AMGN, +4.6%) was the best-performing Dow Jones stocks on Wednesday after management of the biotechnology giant reported expectations-beating second-quarter results and raised full-year guidance.

SpaceX had a lot of gravity

SpaceX (SPCX, -13.6%), on the other hand, cratered in response to its first earnings report as a publicly traded company. Management beat expectations, but not by enough after the biggest IPO in stock market history.

Management said it will expand Starlink Mobile into a full-fledged wireless carrier to compete with telecoms such as AT&T (T, -1.3%), T-Mobile USA (TMUS, -2.1%) and Verizon Communications (VZ, -0.9%).

But Elon Musk downplayed talk of selling China-based electric vehicle operations so Tesla (TSLA, -1.8%) can merge with SpaceX and combine their AI operations.

Meanwhile, Advanced Micro Devices (AMD, -7.0%) sold off hard on word from SpaceX that it will work only with Nvidia (NVDA, +3.4%) to supply the chips and related infrastructure it requires to achieve its extraterrestrial ambitions.

Walt Disney tells another good story

Walt Disney (DIS, +3.7%) beat Wall Street expectations for its fiscal third-quarter bottom line, reporting earnings of $2.05 per share vs a forecast of $1.86. Top-line growth of 6.8% to $25.2 billion fell just short of analysts' estimate of $25.4 billion.

But management reiterated its guidance for double-digit EPS growth for the current fiscal year, as well as for fiscal 2027, and a new leader remains optimistic about the company's near-term trajectory.

"Decades of IP investment have built deep fan connections that translate into strong financial results," CEO Josh D'Amaro (PDF) said, citing accelerating global guests growth at its theme parks, the success of "Toy Story 5" at the box office and ESPN viewership gains. "Together, our results show a unique ability to engage consumers at scale, both digitally and physically, even amid macro uncertainty."

The consumer discretionary stock enjoyed a similar bounce in May following D'Amaro's first reported quarter as CEO; he replaced Bob Iger in March. But it was down more than 13% year to date through Tuesday while the S&P 500 was up almost 14%. Its trailing-12-month, five- and 10-year comparisons are similarly unfavorable.

In fact, despite the high quality of its intellectual property, DIS has been a buy-and-hold bust, as Kiplinger contributor Dan Burrows writes.

"While it's true that you can manipulate historical returns by fussing with their beginning and end points," Burrows explained earlier this year, "Disney's record vs the broader market over pretty much any standardized period you care to measure is terrible." For the past 20 years specifically, DIS' average annualized return has trailed the S&P 500 by more than 4 percentage points.

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David Dittman is the former managing editor and chief investment strategist of Utility Forecaster, which was named one of "10 investment newsletters to read besides Buffett's" in 2015. A graduate of the University of California, San Diego, and the Villanova University School of Law, and a former stockbroker, David has been working in financial media for more than 20 years.