Dow heads for longest winning streak in nearly 6 years; S&P 500, Nasdaq slide

What’s driving markets

After lagging behind the S&P 500 and Nasdaq for most of the year, the Dow Jones Industrial Average has climbed over the past two weeks. The blue-chip gauge is now heading for its longest streak of daily gains since Sept. 20, 2017, according to Dow Jones Market Data.

It’s the latest milestone as value stocks and other lagging sectors of the market appear to be playing “catch up”, said Paul Nolte, senior wealth adviser and market strategist at Murphy & Sylvest Wealth Management, during a phone interview with MarketWatch. Although the Dow’s year-to-date gains are still well behind those of the S&P 500, with the blue-chip gauge up 6.6% since Jan. 1, FactSet data show.

On Wednesday, the S&P 500 and Nasdaq closed at their highest levels in nearly 16 months.

“We’re finally seeing the rotation to value,” he said. “The Dow is playing catch up with the S&P 500 and the Nasdaq.”

Technology stocks were lagging following earnings from Netflix Inc.
NFLX,
-8.47%
released late Wednesday, which showed that revenue fell short. Shares fell 9%.

Tesla Inc.
TSLA,
-8.91%
shares fell 8.1% after the electric vehicle maker beat Wall Street expectations for its second quarter but not in the blowout fashion that some market observers were expecting.

“Netflix missed sales estimates and issued lower-than-expected Q3 guidance, while Tesla’s results showed shrinking profitability with squeeze on margins,” said Henry Allen, strategist at Deutsche Bank.

Meanwhile, shares of IBM Corp.
IBM,
+2.21%
and Johnson & Johnson
JNJ,
+6.16%
drove the Dow higher after both companies beat earnings expectations.

Bad news for Netflix seemed to infect other megacap technology names, as Alphabet Inc. Class A
GOOGL,
-1.84%
and Alphabet Inc.
GOOG,
-2.02%
retreated, as did shares of Apple Inc.
AAPL,
-0.53%
and Microsoft Corp.
MSFT,
-1.96%
after the latter hit a record this week.

Investors also digested earnings from American Airlines Group Inc.
AAL,
-5.90%
and Blackstone Inc.
BX,
-0.59%
which reported before the opening bell. After the close, investors will hear from Capital One Financial Corp.
COF,
-2.36%,
CSX Corp.
CSX,
+0.16%
and First Financial Bancorp
FFBC,
-1.04%,
along with a few others.

In U.S. economic data, weekly jobless benefit claims data showed the number of Americans applying for first-time unemployment benefits fell to a two-month low. Meanwhile, the Philadelphia Fed’s gauge of manufacturing activity came in at negative 13.5 in July, up from 13.7 during the prior month.

Existing home sales fell in June, while leading index of economic indicators dropped 0.7% in June, falling for the 15th month in a row.

Companies in focus

• Tesla
  TSLA,
  -8.91%
  shares slumped after the electric-vehicle maker beat Wall Street analysts for its second quarter but not in the blowout fashion that some market observers were expecting.

• Netflix
  NFLX,
  -8.47%
  easily topped subscriber expectations but brought in less revenue than Wall Street was modeling and delivered a light top-line outlook for the current period.

• United Airlines Holdings Inc.
  UAL,
  +4.09%
  rose 3.9% after the air carrier raised its full-year profit outlook, following strong second-quarter results.

• IBM
  IBM,
  +2.21%
  saw shares rise 3.1% after topping profit expectations for its latest quarter Wednesday, while sporting double-digit revenue growth in its two crucial business categories of Red Hat and data and artificial intelligence.

• Johnson & Johnson
  JNJ,
  +6.16%
  shares rose more than 6% after the healthcare bellwether posted better-than-expected earnings and raised its full-year guidance amid strong growth in its medical-technologies business.