Jan
As the trading week concludes, Wall Street, including the S&P 500, is witnessing a surge in equities, propelling markets towards all-time highs. The rally is accompanied by robust economic data, intensifying expectations of potential rate cuts by the Federal Reserve later in the year.
Tech-Led Rally Propels S&P 500
According to the Wall Street Journal, the technology sector, a significant driver of the S&P 500, spearheaded a remarkable rally. This has positioned the US equity benchmark on the verge of surpassing its January 2022 peak. Hovering around the 4,800 mark, the index benefited from a sustained drop in Treasury volatility, creating an environment conducive to risk-taking. Positive sentiment was further buoyed by a report considered “Fed-friendly,” indicating robust consumer confidence and lower inflation expectations.
Encouraging Signs for Investors
Ian Lyngen from BMO Capital Markets expressed optimism, stating, “Overall, it was an encouraging round of data from the Fed’s perspective.” Consequently, the S&P 500 managed to erase earlier losses, and the Nasdaq 100 experienced a 1% uptick. Key contributors to these gains were chipmakers, with Texas Instruments Inc. advancing by 3.5%, and Advanced Micro Devices Inc. eyeing a record. Megacaps also witnessed upward momentum, although Tesla Inc. faced some challenges. Meanwhile, Treasury 10-year yields remained relatively stable.
Investor Preferences Shifting
Bank of America Corp.’s Michael Hartnett noted a return to favor for the stocks that led the rally in 2023. Investors are once again showing interest in growth, technology, the “AI bubble,” and what he referred to as the “Magnificent Seven.” Despite U.S. shares experiencing redemptions totaling $4.3 billion in the week through January 17, tech-stock funds reported their most significant two-week inflow since August. According to EPFR Global data, these funds reached a total of $4 billion in inflows.
Semiconductor Optimism
According to Bloomberg, in the semiconductor realm, positive forecasts from Taiwan Semiconductor Manufacturing Co. provided a boost. This underscores a positive outlook for the tech industry in 2024. Bloomberg reports suggest that the optimistic projections from Taiwan Semiconductor Manufacturing Co. contribute to the overall positive sentiment in the semiconductor sector, reflecting broader trends in the technology industry for the coming year.
Fed Rate Cut Speculations
As markets reveled in positive developments, Federal Reserve Bank of Chicago President Austan Goolsbee acknowledged the potential for rate cuts in the face of sustained inflation decline. However, he emphasized the central bank’s commitment to making decisions on a meeting-by-meeting basis. Market observers, including Mohamed El-Erian, have cautioned that markets could be overly optimistic regarding the speed and depth of potential Fed rate cuts. This is particularly noteworthy in the context of persistent inflationary pressures.
Corporate Highlights
Amidst these market dynamics, notable corporate developments unfolded. Apple Inc. committed to open its tap-to-pay technology on iPhones to competitors to circumvent potential EU antitrust fines. The European Union is anticipated to block Amazon.com Inc.’s proposed $1.4 billion acquisition of iRobot Corp. The concern cited is potential harm to other robot vacuum makers. Ford Motor Co. reduced production of its F-150 Lightning electric truck due to fading demand for electric vehicles. Spirit Airlines Inc. reassured investors about the continuity of its deal with JetBlue Airways Corp. despite a federal judge blocking the multibillion-dollar buyout.
In the financial sector, J.B. Hunt Transport Services Inc. surpassed Wall Street expectations in hauling freight containers in Q4, signaling potential recovery in the sector. SLB announced a 10% increase in shareholder payouts, reflecting improved results due to increased drilling outside North America. Ally Financial Inc. reported Q4 results surpassing estimates and disclosed the sale of a point-of-sale financing business to Synchrony Financial. Meanwhile, Comerica Inc. projected an 11% drop in net interest income for 2024. Additionally, the company disclosed a fourth-quarter profit decrease attributed to one-time charges.