The major US stock indices closed at session highs, with the S&P and NASDAQ reaching record levels. The Dow industrial average was just 4 points shy of its all-time high. <\/p>\n
The Dow rose 507.85 points (1.14%) to 45010.29, the S&P increased 49.29 points (0.78%) to 6358.91, and the NASDAQ gained 127.33 points (0.61%) to 21020.02. The Russell 2000 also rose, gaining 34.37 points (1.53%) to 2283.12.<\/p>\n
Trading was followed by a series of earnings reports, led by Alphabet. Alphabet’s Q2 2025 earnings beat expectations with an EPS of $2.31 and revenue of $96.43B, despite shares declining by $3.12. Tesla missed EPS expectations but exceeded revenue forecasts; shares fell by $1.46.<\/p>\n
ServiceNow exceeded both EPS and revenue expectations, with shares rising by $56.73. Chipotle met EPS expectations but missed on revenue, resulting in a $4.78 share drop. <\/p>\n
IBM surpassed EPS and revenue expectations, though shares decreased by $13.26. T-Mobile and CSX both exceeded earnings forecasts, with T-Mobile\u2019s shares down slightly and CSX shares rising by $0.42.<\/p>\n
With the market at record highs, we are observing a level of optimism that warrants caution. The AAII Investor Sentiment Survey recently showed bullish sentiment near 45%, well above the historical average, a condition that often precedes market pullbacks. This suggests complacency is setting in, creating an opportune moment to consider protective strategies.<\/p>\n
The after-hours reaction to corporate earnings is a significant warning sign for us. When a search giant beats expectations but still sees its shares fall, it signals that extremely high expectations are already priced in. We believe selling the elevated implied volatility around future earnings announcements through strategies like short straddles or strangles could be profitable.<\/p>\n
We note that the CBOE Volatility Index (VIX) is currently trading near 13, a historically low level that indicates market calm may be fragile. Historically, periods of such low volatility, like in late 2021, have often been precursors to sharp increases in market turbulence. Therefore, buying longer-dated, out-of-the-money put options on broad indices can act as inexpensive portfolio insurance.<\/p>\n
A clear divergence in performance, with small-caps strongly outperforming the mega-cap technology stocks, also has our attention. This points toward a potential rotation, making derivatives on the Russell 2000 more attractive for bullish bets than those on the NASDAQ. This allows traders to stay invested while shifting away from the most crowded and vulnerable part of the market.<\/p>\n
Given the uncertainty at these peak levels, we favor using defined-risk spreads over purchasing naked options. Bear call spreads on over-extended technology names or bull put spreads on the strengthening small-cap index allow for capturing premium while strictly capping potential losses. This is a prudent way to manage risk when the market’s direction is so uncertain.<\/p>\n
The market’s next significant move will likely be dictated by upcoming macroeconomic data, not just corporate performance. With the latest jobs report showing a resilient labor market, any sign of reaccelerating inflation in the next CPI release could force the Federal Reserve into a more aggressive stance. This remains a primary catalyst that could trigger the volatility we anticipate.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" S&P and NASDAQ hit record highs; earnings season sees mixed results from Alphabet, Tesla, and others.<\/p>\n","protected":false},"author":62,"featured_media":16986,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-27090","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/27090","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=27090"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/27090\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/16986"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=27090"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=27090"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=27090"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}