(Bloomberg) — A rally in big tech and a batch of earnings from corporate heavyweights drove stocks toward a record close in a continuation of the surge fueled by the strength of Corporate America.
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With an almost 1% advance, the S&P 500 briefly touched its all-time intraday high near 6,100. Nvidia Corp. led gains in megacaps while Oracle Corp. soared 7% on a $100 billion three way partnership with SoftBank Group and OpenAI, an effort unveiled with President Donald Trump that further boosts prospects for the artificial-intelligence mania that has powered the market. Netflix Inc. surged 11% amid its biggest-ever subscriber gain. Travelers Cos. and Procter & Gamble Co. climbed on strong results.
“We stay risk-on and expect earnings to fuel equities,” said BlackRock Investment Institute strategists including Jean Boivin and Wei Li. “Even in a higher-rate environment, we still think stocks can keep pushing higher so long as fundamentals stay strong.”
To Matt Maley at Miller Tabak, if this earnings season is a great one, it’s a rally that might have legs. Nevertheless, it is going to take greater than merely “beating expectations” to fuel an extra advance of significance.
Despite a recent broadening attempt of the market beyond a handful of megacaps, tech led the best way on Wednesday — and most firms within the S&P 500 actually fell. Poor breadth has been a serious concern of investors, especially amongst those nervous about sky-high valuations and frothy AI stocks.
JP Morgan Chase & Co. Chief Executive Officer Jamie Dimon said there are signs that the US stock market is overheated.
“Asset prices are sort of inflated,” Dimon told CNBC. “You would like fairly good outcomes to justify those prices.”
The S&P 500 rose 0.8%. The Nasdaq 100 climbed 1.6%. The Dow Jones Industrial Average added 0.2%. A Bloomberg gauge of the “Magnificent Seven” megacaps gained 1.7%. The Russell 2000 fell 0.6%.
The yield on 10-year Treasuries advanced 4 basis points to 4.61%. The Bloomberg Dollar Spot Index wavered.
“Markets are reacting positively to the initial wave of Trump policies, with investors showing enthusiasm paying homage to the run-up to the election as they breathe a sigh of relief over the tariff announcements and the early stages of earnings season,” said Mark Hackett at Nationwide.
Hackett also noted hat while the bar for earnings is high, the market is showing impressive resilience.
“A breakout to a fresh record high 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, lofty valuations brought some discussion on whether the benchmark will have the ability to realize such a performance again this 12 months.
Back-to-back annual gains of over 20% for the S&P 500 don’t necessarily make US equities due for a pullback, as history shows the market has typically continued to deliver solid, albeit more muted, returns in the next 12 months,” said Jeff Schulze at ClearBridge Investments. “Further, the present rally is removed from the longest with out a correction.”
Schulze also noted that earnings growth has largely been concentrated amongst a small group of stocks lately. This is predicted to shift in 2025 with a broadening of earnings participation, which should result in improved relative performance for small/mid cap and value laggards.
“While we proceed to observe the brand new administration’s next moves closely, investor mustn’t lose sight of the basics that remain favorable for US equities,” said Solita Marcelli at UBS Global Wealth Management. “Without taking any single-name views, we proceed to love technology, utilities, and financials, and see value in utilizing structured strategies to navigate near-term volatility.”
The stock market’s “January effect” is taking shape to date, with stocks performing strongly throughout the month, in accordance with to John Creekmur at Creekmur Wealth Advisors.
“Investors are actually more focused on earnings and hopes for tax cuts and deregulation from the brand new Trump administration, and fewer so about worries of fewer Federal Reserve rate cuts this 12 months,” he noted.
The Nasdaq 100 has nearly doubled for the reason that start of 2023, adding $14 trillion in value in the method. Evercore ISI’s Wealthy Ross is ready for that rally to proceed, shrugging off fears of a well-known nemesis: bond yields.
Treasury rates jumped to multi-month highs last week as investors parsed economic data for clues on the Federal Reserve’s next interest-rate cut. The yield on the US 10-year has since pulled back after hitting a relative strength reading that typically signals a retreat. Pair that with positive technical signals and the Nasdaq 100 and S&P 500 Index each appear poised to hit fresh all-time highs in the primary quarter, in accordance with Ross.
“At the top of the day technology stays in an excellent position to proceed to guide this market higher,” Ross said.
Corporate Highlights:
Netflix Inc. shares soared after the streaming giant reported its biggest quarterly subscriber gain in history, buoyed by its first major live sporting events and the return of Squid Game.
Salesforce Inc. Chief Executive Officer Marc Benioff said there will likely be “1000’s” of deals for its recent Agentforce AI product in the present fiscal quarter.
Alphabet Inc.’s Google won a UK court ruling to dam Russian media firms from seizing the tech giant’s global assets to get well Russian court-imposed fines which have now accrued interest equal to persistently greater than the world’s economy combined.
United Airlines Holdings Inc. expects a solidly profitable first quarter because the carrier capitalizes on strong demand throughout the winter months, a surprising shift from a normally sluggish travel period.
Procter & Gamble Co. organic sales surpassed estimates on higher volume, a change from earlier quarters where a lot of the company’s growth got here from price hikes.
Johnson & Johnson said a powerful dollar will cut into 2025 revenue and profit, pushing its forecast below analysts’ expectations and driving its shares lower.
Abbott Laboratories is forecasting lower-than-expected first-quarter earnings but full-year profit consistent with Wall Street estimates because the health care company points to strong demand for its medical devices as a growth driver this 12 months.
Ally Financial Inc. fourth-quarter earnings surged as its net interest margin beat analysts’ estimates and expenses and provisions for bad debt declined.