Key Takeaways:
– U.S. stocks remain near record highs, with the S&P 500 making progress toward closing over the 5,000-level for the first time.
– Big tech stocks, primarily NVIDIA, Microsoft, and Amazon drive the market following respective gains of at least 0.6%.
– CloudFlare and FirstEnergy report stronger than expected quarterly earnings, thereby boosting their stock prices.
– The yield on the 10-year treasury has seen an increase to 4.17%, from 4.15% on Thursday.
U.S. Stock Performance: A Closer Look
U.S. stocks are hovering near record heights as we close yet another prosperous week, marking the stocks’ stellar rally since Halloween. This stellar performance in early trading predicts the S&P 500 to finish the day, potentially surpassing the 5,000 level for the first time, on track to celebrate its 14th victorious week in the last 15.
Meanwhile, the Dow Jones Industrial Average slightly dipped by 33 points, or 0.1%, even after it attained its most recent all-time high. Conversely, the Nasdaq Composite observed a 0.4% increase, inching a little closer towards its 2021 record, being only 1.3% behind.
Factors Influencing Market Rally
The Wall Street rally owes much of its momentum to expectations of a relaxation in inflation, prompting the Federal Reserve to decrease interest rates. Delayed interest rate reductions because of continued reports of a strong economy have in turn buoyed company profit expectations. This expectancy, in part, supports the stock rally.
Notably, Cloudflare’s stock skyrocketed after reporting higher profits than analysts predicted for the latest quarter. The cloud-services giant experienced a 21.7% boost, attributing to winning the largest new customer and securing the most extensive renewal in its history.
FirstEnergy also provided a pleasant surprise, with a 4.8% rise – the most significant gain in the S&P 500. This boost resulted from their reported revenue and earnings for the most recent quarter exceeding Wall Street’s predictions.
The Weight of Big Tech Stocks
In this scenario, Big tech stocks are shouldering most of the market’s weight, a trend continuing for over a year now. Leading the rally are Nvidia, Microsoft, and Amazon. All three behemoths have seen at least a 0.6% increase, thereby having the strongest impact on boosting the S&P 500.
While these companies celebrated success, others like PepsiCo witnessed a 3.7% drop in their stock prices. The company’s latest quarterly revenue fell short of analyst expectations, attributing the decline to consumer behaviour reverting to pre-pandemic habits.
Similarly, Expedia dipped by 18.8%, despite outperforming profit forecasts. Slow bookings growth expectations for the first quarter of 2024 caused the stumble. Along with that, the company announced its new CEO, Ariane Gorin, who is set to take the helm this May.
In contrast, Take-Two Interactive, the well-known video game publisher behind “Grand Theft Auto,” plunged by 9.1% post-reporting weaker than expected profits. The company also cut its forecast for the fiscal year ending in March.
Outlook and International Markets
Despite these drops, the majority of the big companies in the S&P 500 this reporting season have surprisingly performed better than expected, infusing optimism into Wall Street. Nonetheless, some dissenters argue this optimism has gone too far, inflating stock prices.
Recently, traders have swiftly gravitated towards riskier investments, leading to a contrarian measure provided by Bank of America. The measure, monitoring market’s fear and greed levels leans toward “sell” rather than “buy.” However, it remains unconvincing.
In the bond market, Treasury yields are nudging higher, displaying calmer movements than earlier in the month. The yield on the 10-year Treasury witnessed a slight rise from 4.15% to 4.17%.
Across the globe, stock indexes in Europe demonstrated a modest, mixed performance. In Asia, multiple markets remained closed due to the Lunar New Year holiday. Tokyo’s Nikkei 225, however, after hitting a 34-year peak earlier in the day, edged up by 0.1%.