Thursday's big stock stories: What’s likely to move the market in the next trading session

U.S. equity markets continued their strong rally, with the S&P 500, Nasdaq 100, and Nasdaq Composite all hitting new record highs, up 10%, 12.5%, and 14% respectively over three months. While the S&P 500's Relative Strength Index crossed into 'overbought' territory, only a small fraction of Dow and Nasdaq 100 components are similarly extended. Individual stock performance highlights include Apple, up 12.4% in August, and Cisco Systems, which reported better-than-expected earnings and outlook, driven by increasing demand for its AI-enabling devices. Equal-weighted ETFs also performed robustly, with the Dow 30 Equal Weight ETF reaching a new high, signaling broad market participation.

Analysis

U.S. equity markets are exhibiting significant strength, with the S&P 500, Nasdaq 100, and Nasdaq Composite all achieving new record highs, reflecting substantial three-month gains of 10%, 12.5%, and 14%, respectively. While the S&P 500's Relative Strength Index (RSI) has entered "overbought" territory by crossing the 70 threshold, this signal is not broadly mirrored across individual components, as only three Dow 30 and nine Nasdaq 100 stocks are similarly extended. This suggests the rally has considerable breadth, a view reinforced by the strong performance of equal-weighted ETFs; the First Trust Dow 30 Equal Weight ETF (EDOW) hit a new high, and the Invesco S&P 500 Equal Weight ETF (RSP) is only 0.33% from its peak. Specific company catalysts are also contributing to market sentiment. Cisco Systems (CSCO) reported better-than-expected earnings and provided an upbeat fiscal year forecast, citing growing demand for its artificial intelligence-enabling hardware, though its stock remained flat in after-hours trading. Apple (AAPL) continues its strong run, gaining 12.4% in August alone. In the automotive sector, Advance Auto Parts (AAP) has surged 86% in the last three months ahead of its earnings, with competitors O'Reilly and AutoZone also seeing double-digit gains, indicating a robust sector-wide trend. Concurrently, the biotech sector is showing signs of renewed momentum, with ETFs like XBI and IBB posting weekly gains of 3.9% and 3.6%, respectively.

Key Decisions for Investors

• Given the broad-based rally and overbought RSI signals on major indices, investors should assess portfolio concentration and consider the strength in equal-weighted ETFs as a sign of healthy market breadth rather than just mega-cap leadership.
• For Cisco Systems, the strong earnings and AI narrative are fundamentally positive, but the flat after-hours stock reaction warrants monitoring the upcoming CEO commentary for catalysts that could drive a price move.
• Investors in Advance Auto Parts should be cautious of a potential 'sell-the-news' event following its 86% run-up into earnings, despite clear strength across the auto parts retail sector.
• The renewed momentum in Apple, with the stock up 12.4% in August and considered a long-term hold by some influential commentators, supports a core position, though its 'overbought' RSI suggests new capital might be deployed on any pullbacks.
• The recent uptick in biotech ETFs like XBI and IBB indicates a potential sector rotation; tactical investors may consider this an early signal to monitor the space for a sustained recovery.