US Market: DJIA, S&P 500 Fall From Record Highs, Nasdaq Worst Hit; Why & What To Expect In Wall St On Aug-6?

The US stock market has calmed from its record rallies as it ended yesterday's trading session on a mixed note. The Dow Jones continued to hit back-to-back fresh record highs, but the S&P 500 index and Nasdaq Composite dropped sharply. The worst to take the hit is the tech-heavy index, Nasdaq. Mega-earnings continue to drive sentiments at Wall Street. On Thursday, investors will eye SpaceX's insider locked-up shares that are expected to expire today. Meanwhile, major earnings like ConocoPhillips, Airbnb, and Warner Bros. will set the tone for all indices. Apart from this, focus has shifted to upcoming US nonfarm payroll data on Friday, which will give further clarity on what the US Federal Reserve's September policy rate decision will be.

US Stock Market

The Dow Jones is unstoppable as it extended its rally to hit a new all-time high of 54,744.33 before correcting in the closing bell of Wednesday to end at 54,349.12 which was higher by 263.24 points or 0.5%. From its record high level, Dow Jones fell over 400 points on August 5th.

Major tech stocks dragged overall Wall Street. For instance, Alphabet Inc plunged over 4%, while Chevron, Amazon and Microsoft slipped by 1% to over 2%, which pushed Dow Jones to correct as well.

Meanwhile, the S&P 500 index ended 12.97 points or 0.17% lower to 7,723.55 after hitting a new all-time high of 7,793.68 overnight.

But the Nasdaq index was worst hit with 221.55 points or 0.83% decline to close at 26,363.44.

On Wednesday, SpaceX plunged nearly 14% after reporting a sharp rise in capital expenditures, fueling concerns about heavy artificial intelligence-related spending. Meanwhile, Nvidia climbed 3.4% after Elon Musk said during SpaceX's earnings call that the company would rely exclusively on Nvidia chips for its AI infrastructure, as per Trading Economics.

"Investors arrive at mid-week digesting a full-fledged Wall Street rally to record highs thanks to growing hopes for Middle East progress and continued earnings power," said analysts at Charles Schwab in a report.

Investors also watched two leading chipmakers earnings. It would be Sandisk and Western Digital. As per Schwab's note, one question is how long they think the industry-wide memory shortage might last. It's driven up prices, hurting companies like Apple that rely heavily on these products.

Sandisk stock ended 5.40% lower despite topping analysts estimates. In its fourth-quarter earnings, the chipmaker recorded non-GAAP earnings of $39.25 per share, while its revenue rose to $8.97 billion. However, Sandisk's CEO David Goeckeler is expecting PC and smartphone shipments to drop by mid-teens in 2026 but would stabilize by next year.

Additionally, Western Digital stock slipped nearly 11% before recovering some losses overnight. Just like Sandisk, Western Digital also surpassed street estimates in earnings. It recorded non-GAAP gross margin of 54.4%, up from last year. While its cash flow surged to $1.39 billion, while free cash flow touched $1.28 billion.

However, Western Digital's guidance could not impress investors in comparison to Seagate. Western Digital is predicting first-quarter revenue of $4 billion to $4.2 billion and forecasts adjusted earnings of $3.85 to $4.15 a share in the upcoming quarter.

The midpoint of both ranges exceeded expectations, but only modestly. After the stock's surge, investors wanted guidance that would force analysts to raise forecasts sharply. The comparison with Seagate made Western Digital's outlook appear less impressive, as per invezz report.

US Stock Market Outlook On August 6:

As of now on Thursday, US stock futures are trading higher, as investors focus on another round of earnings. Among popular earnings report on Thursday include ConocoPhillips, Airbnb, and Warner Bros. Discovery.

Other companies include Aflac Inc. (AFL), American International Group Inc. (AIG), Becton Dickinson and Co. (BDX), Cheniere Energy Inc. (LNG), Cloudflare Inc. (NET), Constellation Energy Corp. (CEG), Datadog Inc. (DDOG), Howmet Aerospace Inc. (HWM), Monster Beverage Corp. (MNST), Parker-Hannafin Corp. (PH), Sempra (SRE), and Targa Resources Corp. (TRGP),

Among economic data, watched out for Continuing Claims, EIA Natural Gas Inventories, Initial Claims, Productivity-Preliminary, Unit Labor Costs, and Wholesale Inventories report on August 6.

Also, SpaceX's lock-up shares is expected to expire on Thursday, which will further drive the sentiments. Reports are claiming that SpaceX employees and early investors are likely to offload up to 911.5 million shares on Thursday.

Furthermore, investors will countdown for upcoming US non-farm payroll.

Potential tightness in the services sector could spark wage growth, something to monitor in Friday's payrolls report. Any sign of labor market tightness could exacerbate the market's focus on the Fed's inflation-fighting credibility, noted Kevin Gordon, head of macro research and strategy at the Schwab Center for Financial Research (SCFR).

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