S&P 500 closes at first file excessive in two years as tech fuels U.S. shares

What drove markets

U.S. shares rose sharply on Friday, with the S&P 500 surpassing its earlier all-time closing peak of 4,796.56, reached Jan. 3, 2022.

Stock-market traders are nonetheless “pricing in a soft landing” for the U.S. economic system, mentioned Matt Stucky, chief portfolio supervisor at Northwestern Mutual Wealth Management Co., in a cellphone interview Friday.

Investors had been digesting contemporary financial information that included a constructive studying from the University of Michigan’s consumer-sentiment gauge for January. The preliminary studying of the sentiment survey shot as much as 78.8, from 69.7 in December, to succeed in the very best stage since July 2021.

“Better consumer confidence is a good thing for the economy,” Stucky mentioned. “More confident consumers are more likely to spend and keep the economy pretty resilient.”

Chicago Federal Reserve President Austan Goolsbee mentioned Friday morning that the Fed may begin chopping rates of interest this yr “if we continue to make surprising progress on inflation.” He was talking in an interview with CNBC.

“We don’t want to commit ourselves before the job is done,” Goolsbee mentioned. But “as inflation comes down, that opens the door to a reduction in restrictiveness.”

See: Goolsbee says it’s too quickly to find out when Fed will minimize rates of interest

Meanwhile, expertise was the best-performing sector within the S&P 500 index on Friday, with a acquire of greater than 2%, based on FactSet information.

The Invesco QQQ Trust Series 1
QQQ,
an exchange-traded fund that tracks the Nasdaq-100 index, rose to round $421 on Friday. At that stage, the ETF noticed a brand new file excessive, based on Dow Jones Market Data.

The Nasdaq-100 index was helped alongside by beneficial properties from semiconductor corporations Nvidia Corp.
NVDA,
+4.17%
and Broadcom Inc.
AVGO,
+5.88%.

That’s after better-than-expected outcomes from chip-making big Taiwan Semiconductor Manufacturing Co.
TSM,
+1.04%
on Thursday helped drive a pointy acquire for the tech-heavy Nasdaq Composite. Semiconductors obtained one other increase on Friday after the most recent gross sales steerage launched by Super Micro Computer Inc.
SMCI,
+35.94%.

Markets entered 2024 with expectations for six or seven interest-rate cuts by the Fed this yr. Those expectations have seen pushback, particularly given robust financial information, similar to retail-sales information, reported earlier this week.

In “a soft-landing scenario, you’re unlikely to see those six cuts come to fruition,” Stucky mentioned, including that Treasury yields have been “grinding higher,” reflecting a resilient economic system.

The yield on the 10-year be aware
BX:TMUBMUSD10Y
was little modified on Friday at 4.145%, however it has climbed greater than 28 foundation factors this yr, based mostly on 3 p.m. Eastern time ranges, based on Dow Jones Market Data.

After the U.S. inventory market “took a pause” this month, the S&P 500 can most likely maintain rising in 2024 following a contemporary file excessive, Keith Lerner, co-chief funding officer at Truist Advisory Services, mentioned in a cellphone interview Friday. Even although the index took a break in January, “there’s been an underlying bid for the market” and “a lack of intense selling,” he mentioned.

U.S. corporations within the S&P 500 index are largely beating analysts’ expectations to date this earnings season. Of the 52 corporations within the S&P 500 which have already reported earnings for the ultimate three months of 2023, 84.6% beat analysts’ expectations, based on information from LSEG.

In different financial information launched on Friday, existing-home gross sales for December fell 1%.

“Right now, the economy, earnings and the credit markets continue to show resilience,” Lerner mentioned. He mentioned he’s chubby large-cap shares within the U.S. and views the pullback in small-cap shares this month as a great “entry point” for individuals who might have missed their rally late final yr. 

“This market rally is buying into that soft landing,” he mentioned. “If we don’t have that soft landing, we’re going to have challenges.”

Companies in focus

• Shares of Wayfair Inc.
  W,
  +10.28%
  jumped 10.3% after the corporate introduced one other spherical of layoffs.
• Super Micro Computer Inc.
  SMCI,
  +35.94%,
  a producer of pc merchandise, noticed its shares surge 35.9% after the corporate launched a gross sales outlook that was far stronger than Wall Street had anticipated.  
• Shares of Roomba maker iRobot
  IRBT,
  -26.93%
  sank 26.9% following reviews that European antitrust regulators deliberate to dam a deliberate buyout by Amazon.com Inc.
• Shares of Travelers Cos.
  TRV,
  +6.72%
  jumped 6.7% after the property-casualty insurer mentioned decrease disaster losses and better underwriting beneficial properties helped produce file earnings.

Barbara Kollmeyer contributed.