Pre-Market Update: Dow Hits Another Record While Nasdaq Sinks — What’s Driving the Split?

TLDR

• Dow futures rose 0.3% while Nasdaq 100 futures dropped 0.3% in Thursday pre-market trading
• Investors are rotating out of tech stocks due to concerns about AI overspending and high valuations
• AMD, Sandisk, and Western Digital saw sharp declines after disappointing earnings reactions
• Nvidia rose over 3% after SpaceX announced it would exclusively use Nvidia chips
• Iran and Oman reached a temporary agreement on a shipping route through the Strait of Hormuz, steadying oil prices near $80 per barrel

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US stock futures showed a split picture on Thursday morning. Dow Jones futures gained 168 points, or 0.3%, while Nasdaq 100 futures fell 0.3%. S&P 500 futures edged up 0.2%.

The Dow closed at a record high for the third straight session on Wednesday. The Nasdaq fell on the same day, dragged down by a selloff in Alphabet shares after the company reshuffled its AI division.

The two indexes are again pointing in opposite directions Thursday morning. This pattern reflects a broader rotation by investors away from large tech names.

Concerns about how much companies are spending on AI, and whether that spending will pay off, are weighing on sentiment. High valuations for some tech stocks are adding to the pressure.

Tech Stocks Take the Brunt

Advanced Micro Devices dropped 7.04% following its earnings report. Sandisk and Western Digital also saw sharp declines as investors punished AI-related names that failed to meet expectations.

Nvidia bucked the trend, rising over 3% on Wednesday. The gain came after SpaceX confirmed it would use Nvidia chips exclusively for its operations.

SpaceX stock remains near all-time lows. A lockup period expires Thursday, which could push the stock lower if insiders choose to sell their shares.

Geopolitical Developments Offer Some Relief

Iran and Oman have agreed to a temporary shipping route through the Strait of Hormuz. Iranian Foreign Ministry spokesman Esmail Baghaei said a deal would be finalized “if certain third parties do not obstruct this process.”

Oil prices steadied near $80 per barrel following the news. Gold prices climbed to multiweek highs as geopolitical uncertainty continued to drive safe-haven demand.

Deutsche Bank analyst Jim Reid noted that strong earnings and the Hormuz agreement could act as market catalysts. He also said the equity rally had begun losing momentum by the end of Wednesday’s session.

Markets are also watching the labor market closely. A Challenger, Gray and Christmas report on layoffs and initial jobless claims is due Thursday.

Friday brings the July employment report. That data will give investors a clearer picture of whether the Federal Reserve has room to raise interest rates further in its fight against inflation.

The Fed’s next move remains a key focus for traders. Any signs of a hot labor market could push expectations for more rate hikes higher.

Investor caution is likely to persist through Friday. The jobs report is seen as one of the most important data points for markets this month.