Bespoke: S&P 500’s August Rebound Driven by Broad Market Strength Across Multiple Metrics More U.S. stocks are participating in the ongoing stock market rally, with the S&P 500 extending its August rebound, according to Bespoke Investment Group. “Since the sharp decline that bottomed out on August 5, the market’s recovery has been marked by robust underlying breadth,” Bespoke noted in a Tuesday report. The wealth-management and research firm pointed out significant improvements across various metrics, including the number of stocks reaching 52-week highs, the percentage of stocks trading above their 50-day moving averages, and the net number of advancing stocks. On Tuesday, the S&P 500’s 10-day advance/decline line stayed above 1,000 for the seventh consecutive day, the longest streak since October 2020. Bespoke highlighted that this is “one of just 22 such streaks since 1990.” “Historically, when the S&P 500’s 10-day A/D line remained above 1,000 for seven days, future returns have typically been positive, especially when these streaks occur at least a year apart,” Bespoke added. The S&P 500 rose 0.2% on Tuesday to close at 5,625.80, just 0.7% below its record close on July 16. The index is up 1.9% in August and has gained 17.9% year-to-date. On Monday, the S&P 500’s 10-day advance/decline line reached 1,733, its highest level since late October 2022, which coincided with the start of the bull stock market, according to Bespoke. U.S. stocks broadly advanced on Tuesday, with the Nasdaq Composite rising 0.2% and the Dow Jones Industrial Average inching up 0.1% to hit a new all-time high.

You might expect the final week of August to be one of the slowest on Wall Street, with traders enjoying the last days of summer before Labor Day. However, a major event is about to capture the market’s attention: Nvidia’s upcoming earnings report. In fact, one money manager suggested that Nvidia’s results could even steal the spotlight from Federal Reserve Chair Jerome Powell’s much-anticipated speech on inflation, the economy, and interest rates at Jackson Hole on Friday. “Forget the Fed—it’s all about Nvidia’s earnings on August 28th. The wait is the hardest part,” joked Gina Bolvin, president of Bolvin Wealth Management Group, in a nod to the late Tom Petty. For Nvidia to maintain its soaring valuation, the company will need to deliver another impressive quarter and provide strong guidance. The Roundhill Magnificent Seven ETF, which consists solely of Nvidia, Apple, Microsoft, Amazon, Alphabet, Meta, and Tesla, is currently trading at about 36 times estimated 2024 earnings, up from a P/E ratio of 32 following the market’s drop on August 5. This is significantly higher than both the broader market and the rest of the tech sector. The S&P 500 trades at around 23 times this year’s earnings forecasts, while the Invesco QQQ Trust, which tracks the Nasdaq 100, has a P/E of 30. The Magnificent Seven have a considerable impact on these indexes, skewing the multiples upward due to their massive market caps. The pressure is on Nvidia to prove that the AI buzz is justified and to support Big Tech’s elevated valuations. Nvidia is currently valued at around 47 times forward earnings estimates, with only Tesla among the Magnificent Seven having a higher P/E ratio, approaching 100. But Nvidia might be up to the task. Earnings and revenue are expected to more than double compared to a year ago. It’s worth remembering that Nvidia faced high expectations last May, and the company didn’t just meet them—it exceeded them, beating analysts’ forecasts by 7% and sparking another rally in tech stocks. With other major tech companies already reporting positive outlooks for AI-driven products and services, this is promising news for Nvidia, whose largest customers include Microsoft, Amazon, Alphabet, and Meta. “Each of these companies highlighted strong demand and investment in AI-related products that should support tech earnings moving forward,” said Larry Adam, chief investment officer at Raymond James, in a report. “This earnings strength is why we favor megacap tech and would view any weakness as a buying opportunity,” Adam added. Nvidia’s chips are also in high demand beyond the tech sector, particularly in the automotive industry. “Nvidia continues to experience strong demand from key customers across all its processors and is struggling to keep up,” said Ivan Feinseth, chief market strategist at Tigress Financial Intelligence. Feinseth also emphasized that “significant upside exists from current levels” for Nvidia. Wall Street is in agreement. Nearly all analysts covering the stock have given it a Buy rating, with the consensus price target nearly 10% above current levels. Nvidia shares were up 1.3% to $125.40 in premarket trading on Friday. While Nvidia is certainly a crowded trade, with nearly everyone betting on its continued rise, the company has consistently rewarded its investors and helped lift other Big Tech giants along the way.