A rally in some of the world’s largest technology companies fueled a rebound in stocks, with traders also weighing the latest economic data and Fedspeak for clues on the US central bank’s next steps.
After a back-to-back slide, the S&P 500 rose as bond-market volatility abated. The Nasdaq 100 closed at an all-time high as Apple Inc. climbed on an analyst upgrade and Taiwan Semiconductor Manufacturing Co.’s outlook lifted chipmakers on hopes for a global tech recovery in 2024.
Stock traders were unfazed by data underscoring labor-market strength at a time when Fed officials are looking for signs of a slowdown as they contemplate cutting rates. Fed Bank of Atlanta President Raphael Bostic urged policymakers to proceed cautiously given the potential impacts of unpredictable events from elections to global conflicts. His Philadelphia counterpart Patrick Harker said he expects inflation to keep ebbing toward the target.
“Given the underlying strength of the US economy, it’s difficult to get too bearish at this point,” said Chris Zaccarelli at Independent Advisor Alliance. “The pervasive pessimism and doubt about the stock market and economy is a contrarian signal and one of the best reasons to push against the crowd. Once the last skeptic has been converted, the market will be again vulnerable to a large shock, but we aren’t at that point yet.”
The S&P 500 closed around 4,780, while the Nasdaq 100 added 1.5%. A gauge of chipmakers gained almost 3.5%. Treasury two-year yields remained around 4.35%. Oil topped $74 a barrel. Bitcoin slid below $41,000.
The rebound in stocks suggests things are calmer, but that’s not to say conditions will remain that way, according to Fawad Razaqzada at City Index and Forex.com. He cited a growing perception that big central banks might not lower rates as much or as soon as the market thought they would.
“There’s clearly a desperate desire to cling on to the optimism that enabled such a strong end to the year, but unlike in that period, the data isn’t really playing ball,” said Craig Erlam at Oanda. “The releases we’ve seen so far this month have been fine and in the main, perfectly in keeping with the expectations people had coming into 2024. But is that enough?”
Meantime, Blackstone Inc. Chief Executive Officer Steve Schwarzman said he expects the Fed to lower rates and sees “animal spirits” returning to the markets as more investors make that bet too. The Fed’s timing on rate declines won’t be clear, creating a “baffling effect” among investors, he told Bloomberg Television on the sidelines of the World Economic Forum.
Coming off its best winning streak in two decades, the S&P 500 has run into a roadblock in 2024, with its all-time closing record set two years ago remaining elusive. But a technical gauge that measures the momentum to buy or sell stocks signals that bulls are still stepping in to snap up shares.
