The US stock market started the day on a positive note, thanks to strong earnings from Microsoft and Meta. Meta’s shares jumped nearly 11%, while Microsoft’s rose by 6.70%. Nvidia’s shares also went up by 1.81%. The NASDAQ index led the pack with a 1.28% increase. The S&P index rose by 0.75%, and the Dow industrial average had a modest gain of 0.20%. In contrast, the Russell 2000 index dropped by 0.54%.

New All-Time Highs for S&P and NASDAQ

Both the S&P and NASDAQ reached new all-time intraday highs. In 2025, Apple’s shares fell by 16.63%, but Amazon’s shares increased by 5.90%. Other notable stocks include Alphabet with a 2.40% rise and Nvidia, which saw a 35.29% gain. Tesla’s shares have decreased by 20.62% this year, highlighting varied performances among key stocks. Apple and Amazon will announce their earnings after the market closes, which could impact stock movements further. The market is clearly divided between a few large tech winners and the rest. The NASDAQ and S&P are hitting new highs, while the Russell 2000, which represents smaller companies, is declining. This situation suggests that traders should be cautious when making broad market bets. The struggles of smaller companies likely reflect recent economic data. The latest CPI report from mid-July 2025 indicated inflation remained at a stubborn 3.1%. The Federal Reserve has also indicated it will keep interest rates high for an extended period, which tends to hurt smaller, debt-laden firms more than wealthy giants like Microsoft.

Post-Earnings Strategies

For top-performing stocks like Microsoft and Meta, the major earnings surge has already occurred. Traders might think about selling out-of-the-money put options to earn premium, betting that these stocks won’t drop sharply in the coming weeks. This strategy takes advantage of a decrease in implied volatility after earnings. All eyes are on Apple’s earnings report due later today. With the stock down over 16% this year, expectations are low, setting the stage for a potential surge in volatility. Buying a straddle—purchasing both a call and a put option—could be a good way to profit from a significant price swing in either direction. This happened before, notably in May 2024 when Apple surprised everyone with a huge buyback plan, causing the stock to soar. Given the negative sentiment in 2025, any positive news on their AI strategy or a similar surprise could lead to a big rally. Conversely, a disappointing report could simply confirm the current negative trend. The struggles of other past leaders like Tesla, down over 20% this year, indicate an ongoing shift in the market. For traders holding these underperforming stocks, selling covered calls could bring in income while waiting for a potential turnaround. This strategy limits the upside but provides some safety if the stock continues to decline. With the major indices at record highs but showing clear underlying weakness, it’s wise to hedge portfolios. The CBOE Volatility Index (VIX) is currently around 13.5, which is low for 2025. Buying VIX call options or options on volatility-tracking ETFs could serve as a relatively inexpensive insurance policy against a market pullback in August or September. Create your live VT Markets account and start trading now.

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