A record-breaking rally propels the S&P 500 to new highs, fueled by optimism for a dovish Fed and surging tech giants.
In a display of relentless bullishness, the U.S. stock market scaled unprecedented heights on Thursday, capping a two-day winning streak. The S&P 500, the benchmark index for American equities, notched its 16th record close of the year, closing at a staggering 5157.36, a 1% gain. Leading the charge were the tech titans, whose collective ascent propelled the tech-heavy Nasdaq Composite even further, with a noteworthy 1.5% surge.
This market euphoria follows Federal Reserve Chair Jerome Powell's testimony earlier this week, which rekindled hopes of a potential shift in Fed policy. His remarks indicating that the central bank is "not far" from considering interest rate cuts sent a wave of optimism through the market. This sentiment materialized in the bond market, with the yield on the 2-year Treasury note, highly sensitive to interest rate expectations, experiencing a dip to 4.512% from 4.560%. The 10-year Treasury note mirrored this trend, falling for the third consecutive session to 4.090%, its lowest point since early February.
All eyes now turn towards Friday's crucial monthly jobs report, which will shed light on the state of the American economy and its potential influence on the Fed's near-future decisions. This market surge builds upon a year-long rally, driving the S&P 500 an impressive 8.1% upwards. This unwavering optimism seems to be the prevailing sentiment among investors, as Matthew Tym, Head of Equity Derivatives Trading at Cantor Fitzgerald, aptly observes, "There's no fear in the market. People really don't seem to be worried about any sort of downside."
The rally wasn't confined to broad indices. Prominent tech stocks, particularly those poised to benefit from the burgeoning artificial intelligence boom, experienced a much-needed rebound. Meta Platforms, a major player in the AI space, witnessed a significant 3% growth. Chipmaker Nvidia, a frontrunner in the AI revolution, stole the show with a 4.5% jump, propelling its stock price to a new record high. This surge extends to the PHLX Semiconductor Index, which breached the 5000 mark for the first time ever, solidifying its position as the year's best-performing sector with a staggering 24% growth in 2024. Tym further emphasizes a noticeable trend – traders are actively acquiring stock options contracts that would profit from a sustained rally, particularly in tech stocks.
Beyond the tech bonanza, corporate news also stirred the market. New York Community Bancorp witnessed a 5.8% surge after the struggling lender slashed its quarterly dividend. This decision comes after a tumultuous Wednesday session that saw the stock price plummet due to a Wall Street Journal report suggesting the bank's need for a cash infusion. However, the day ended positively following news of a $1 billion investment, showcasing the market's volatile nature.
The supermarket giant, Kroger, also emerged as a notable winner, with its share price skyrocketing over 9%. This impressive performance came after Kroger released a stellar earnings report, which instilled confidence in investors. The company's CEO, in an interview with The Wall Street Journal, expressed optimism regarding a potential improvement in consumer sentiment, suggesting an end to the recent period of rising food prices and economic pessimism.
The global market also displayed positive signs, with the Stoxx Europe 600 rising by 1%. At the time of writing, Japan's Nikkei 225 is down slightly by 0.85%, while Hong Kong's Hang Seng Index is up by 0.8% and South Korea's Kospi is experiencing a 1.3% gain. While S&P 500 futures are currently down by 0.1%, the overall market sentiment remains robust.
This record-breaking rally underscores the dominance of the tech sector and the prevailing optimism surrounding a potential Fed policy shift. As investors eagerly await the jobs report, one thing remains clear: the U.S. stock market is currently experiencing a period of unprecedented momentum.
