(Bloomberg) — A rally by Big Tech companies and a series of gains by corporate heavyweights propelled stocks to a record close in a continuation of the rally fueled by strength in U.S. companies.
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Up nearly 1%, the S&P 500 briefly hit its all-time intraday high near 6,100. Nvidia Corp. led gains in megacaps, while Oracle Corp. soared 7% in a $100 billion joint venture with SoftBank Group and OpenAI, an effort unveiled with President Donald Trump that further boosts the company’s prospects. the artificial intelligence mania that has driven the market. Netflix Inc. rose 11% amid its biggest subscriber gain to date. Travelers Cos. and Procter & Gamble Co. rose on strong results.
“We remain risk-on and expect earnings to lift stocks,” said BlackRock Investment Institute strategists including Jean Boivin and Wei Li. “Even in a higher rate environment, we still think stocks can continue to rise as long as fundamentals remain strong.”
For Miller Tabak’s Matt Maley, if this earnings season is good, it’s a rebound that could have strength. However, it will take more than simply “exceeding expectations” to drive significant new progress.
Despite a recent attempt to broaden the market beyond a handful of mega-caps, tech led the way on Wednesday, and most S&P 500 companies actually fell. Lack of breadth has been a major concern for investors, especially among those nervous about sky-high valuations and frothy AI stocks.
JP Morgan Chase & Co. CEO Jamie Dimon said there are signs the U.S. stock market is overheated.
“Asset prices are a little bit inflated,” Dimon told CNBC. “You need pretty good results to justify those prices.”
The S&P 500 rose 0.8%. The Nasdaq 100 rose 1.6%. The Dow Jones Industrial Average added 0.2%. A Bloomberg gauge of the “Magnificent Seven” mega-caps gained 1.7%. The Russell 2000 fell 0.6%.
The 10-year Treasury yield rose four basis points to 4.61%. The Bloomberg Dollar Spot Index faltered.
“Markets are reacting positively to Trump’s initial wave of policies, with investors showing enthusiasm reminiscent of the run-up to the election as they breathe a sigh of relief from the tariff announcements and the early stages of earnings season,” Mark said. Hackett in Nationwide.
Hackett also noted that while the bar for earnings is high, the market is showing impressive resilience.
“A break to a new record would energize the bulls, as earnings seasons have been choppy in recent quarters,” he concluded.
After the S&P 500 soared 24% in 2023 and 23% in 2024, the lofty valuations sparked some discussion about whether the benchmark can achieve that performance again this year.
“Consecutive annual gains of more than 20% for the S&P 500 do not necessarily cause US stocks to retreat, as history shows that the market has typically continued to deliver solid, albeit more muted, returns over the following year,” said Jeff Schulze of ClearBridge Investments. “Furthermore, the current rally is far from the longest without a correction.”
Schulze also noted that earnings growth has been largely concentrated in a small group of stocks in recent years. This is expected to change in 2025 with a widening of profit shares, which should lead to better relative performance for small and mid-cap companies and value laggards.
“As we continue to closely watch the new administration’s next steps, investors should not lose sight of the fundamentals that remain favorable for U.S. stocks,” said Solita Marcelli of UBS Global Wealth Management. “Without taking singular views, we continue to like technology, utilities and finance, and see value in utilizing structured strategies to navigate near-term volatility.”
The stock market’s “January effect” is taking shape so far, with stocks doing well all month, according to John Creekmur of Creekmur Wealth Advisors.
“Investors are now more focused on earnings and hopes for tax cuts and deregulation by the new Trump administration, and less on concerns that the Federal Reserve will cut rates less this year,” he noted.
The Nasdaq 100 has nearly doubled since the beginning of 2023, adding $14 trillion in value in the process. Evercore ISI’s Rich Ross is prepared for that rally to continue, shrugging off fears of a familiar enemy: bond yields.
Treasury rates jumped to multi-month highs last week as investors analyzed economic data for clues about the Federal Reserve’s next interest rate cut. Since then, the US 10-year bond yield has retreated after reaching a relative strength reading that normally signals a pullback. Add to that positive technical signals, and the Nasdaq 100 and S&P 500 indices appear poised to hit new all-time highs in the first quarter, according to Ross.
“At the end of the day, the technology remains uniquely positioned to continue leading this market,” Ross said.
Corporate Highlights:
Netflix Inc. shares soared after the streaming giant reported the biggest quarterly subscriber gain in its history, boosted by its first major live sporting events and the return of the Squid Game.
Salesforce Inc. CEO Marc Benioff said there will be “thousands” of deals for its new Agentforce AI product in the current fiscal quarter.
Alphabet Inc.’s Google won a U.K. court ruling to stop Russian media companies from seizing the tech giant’s global assets to recover fines imposed by Russian courts that have now accrued interest equal to many times more. than the world economy combined.
United Airlines Holdings Inc. expects a solidly profitable first quarter as the airline capitalizes on strong demand during the winter months, a surprising turnaround from a normally slow travel period.
Procter & Gamble Co.’s organic sales beat estimates with higher volume, a change from previous quarters where most of the company’s growth came from price increases.
Johnson & Johnson said a strong dollar will reduce 2025 revenue and profits, pushing its forecast below analysts’ expectations and sending its shares tumbling.
Abbott Laboratories forecasts lower-than-expected first-quarter earnings but full-year earnings in line with Wall Street estimates, as the healthcare company points to strong demand for its medical devices as a driver of growth this year.
Ally Financial Inc.’s fourth-quarter earnings rose as its net interest margin surpassed analyst estimates and bad debt expenses and provisions declined.
This week’s key events:
Eurozone consumer confidence, Thursday
US unemployment claims, Thursday
Bank of Japan policy meeting, Friday
Eurozone HCOB manufacturing and services PMI, Friday
US University of Michigan Consumer Confidence, Existing Home Sales, S&P Global Manufacturing and Services PMI, Friday
Some of the main movements in the markets:
Stocks
The S&P 500 rose 0.8% as of 12:51 p.m. New York time
The Nasdaq 100 rose 1.6%
The Dow Jones Industrial Average rose 0.2%
The MSCI World index rose 0.7%
The Bloomberg Magnificent 7 Total Return Index rose 1.7%
The Russell 2000 index fell 0.6%
Coins
Bloomberg Dollar Spot Index Little Changed
The euro fell 0.1% to $1.0416
The pound fell 0.2% to $1.2320.
The Japanese yen fell 0.7% to 156.61 per dollar
Cryptocurrencies
Bitcoin fell 2.2% to $104,426.78
Ether fell 1.5% to $3,283.7.
Captivity
The 10-year Treasury yield rose four basis points to 4.61%
The yield on the 10-year German bond rose two basis points to 2.53%
The British 10-year yield rose four basis points to 4.63%
Raw materials
West Texas Intermediate crude rose 0.1% to $75.93 a barrel
Spot gold rose 0.5% to $2,757.68 an ounce.
This story was produced with the help of Bloomberg Automation.
–With help from Cecile Gutscher, Sujata Rao, Robert Brand and Aya Wagatsuma.
