The major US indices closed higher, with the NASDAQ leading the gains. Apple shares surged by over 5.10% following the announcement of a $100 billion investment in the US, alongside an existing $500 billion pledge, gaining exemption for its products from US tariffs on imports from India.
Reports that President Trump may soon meet with Russia and Ukraine leaders also boosted markets. However, AMD shares fell by 6.42%, despite earnings exceeding expectations, due to worries over data centres impacting the stock. SMCI shares dropped 18.29% after reports of production costs affecting profits.
Nvidia And Broadcom
Nvidia shares rose slightly by 0.65%, with the company’s earnings due on August 27. Broadcom and Intel saw gains of 2.98% and 1.09% respectively. Other stocks saw positive movements, with Shopify surging 21.64%, Roblox climbing 5.43%, and Walmart up by 4.32%.
The final figures for the major indices were: the Dow Jones rose by 81.38 points, or 0.18%, to 44,193.12. The S&P 500 increased by 45.87 points, or 0.73%, to 6,345.06, while the NASDAQ climbed by 252.87 points, or 1.21%, to 21,169.42. The Russell 2000, however, slightly decreased by 4.38 points, or 0.20%, to 2,221.28.
Given the market’s reliance on a few mega-cap names, we see a clear split that presents opportunities. While the Nasdaq’s rally is encouraging, the simultaneous drop in the Russell 2000 suggests traders are favouring large, stable companies over smaller ones. This divergence points to underlying economic uncertainty, even with the headline indices pushing higher.
The potential geopolitical meeting next week is likely suppressing near-term market anxiety. We’ve seen the CBOE Volatility Index (VIX) dip below 15, reflecting this optimism and making it cheaper to buy options for protection. For traders, this could be a window to purchase puts on broader index ETFs like SPY or QQQ as a hedge against any unexpected negative news.
Apple’s Stock Surge
Apple’s surge is the main story, driven by its tariff exemption for products made in India. Considering India now accounts for over 25% of global iPhone production, a significant increase from just 7% back in 2021, this is a fundamental shift that supports the stock. We should consider bullish strategies like call spreads on AAPL to capitalize on this momentum while managing risk.
There is significant weakness in the semiconductor space, creating a chance for pairs trading. The sharp declines in AMD and SMCI due to data center and profit margin concerns contrast with the gains in Broadcom and Nvidia. This suggests money is rotating within the sector, not abandoning it entirely.
Looking ahead, we must be positioned for the upcoming Nvidia earnings on August 27. The options market is already pricing in a substantial double-digit percentage move, indicating high uncertainty and the potential for a dramatic price swing. A long straddle or strangle could be an effective way to play this expected volatility, regardless of the direction.
The weakness in small-cap stocks, reflected by the Russell 2000’s decline, is a cautionary signal. This pattern reminds us of periods like late 2023, when concerns over future interest rate policy weighed heavily on smaller firms more sensitive to borrowing costs. We can use options on the IWM ETF to express a bearish view on this segment or to hedge long positions in large-cap tech.
