The Nasdaq 100 witnessed a significant rally, adding $3.5 trillion in market capitalization over just four days, pushing the index to its highest level since mid-July. This "melt-up" was driven by several factors, including a drop in Treasury yields, strong corporate earnings from AI-related companies, and renewed optimism regarding a potential deal to reopen the Strait of Hormuz. The market sentiment rapidly shifted from a "get the hell out" mentality to "fear of missing out" as investors rushed to re-enter positions.
The rebound in the tech-heavy index was supported by a broader market rally, with the S&P 500 reaching a new record high, its first in two months, and the Dow Jones Industrial Average closing above 54,000 points for the first time ever. Brent crude prices fell below $80 per barrel to $79.36, its lowest since July 10, following statements from Treasury Secretary Scott Bessent suggesting a deal on the Strait of Hormuz was imminent. This geopolitical development, coupled with falling oil prices, eased inflation concerns and pushed Treasury yields lower, making growth stocks more attractive.
Individual tech giants played a crucial role in the rally. Companies like Meta Platforms, Amazon, Alphabet, Microsoft, and Nvidia saw substantial gains, with Meta rising 6%, Amazon, Alphabet, and Microsoft gaining 4% to 5%, and Nvidia increasing by 3%. Amazon notably crossed the $3 trillion market value threshold. Palantir Technologies also surged over 17% after reporting strong Q2 revenue of $1.94 billion, a 93% year-over-year increase, and raising its full-year U.S. commercial guidance to over $3.42 billion. The rally also saw a significant rebound in momentum strategies and MegaCap technology stocks, adding trillions in aggregate market capitalization.
Contributing to the renewed optimism was better-than-expected manufacturing activity, with the ISM index hitting 55.6, and encouraging comments from New York Fed President John Williams about gradual inflation moderation. Furthermore, a report showing U.S. job openings fell to 7.359 million in June, below expectations, led investors to anticipate a higher probability of interest rate cuts before year-end. This expectation, combined with cleaner market positioning after a period of leverage reduction in July, provided a launchpad for the rapid market ascent.
