- Easing rate cut bets fail to deter tech rally as S&P 500 surpasses 5,000
- Relief that there are no major changes to the US CPI annual reviews; The next report will be in January
- Dollar moves sideways in thin session amid Asian holidays
Tech boom pushes S&P 500 to new record
Stocks on Wall Street extended their record streak last week, as upbeat earnings and relief that the annual revision of the U.S. consumer price index left inflation trends largely unchanged offset concerns that the Federal Reserve Keep your restrictive policy for too long.
The S&P 500 finished the week with gains of 1.4%, closing above the 5,000 mark for the first time in another historic milestone for the benchmark index. Meanwhile, the , is about to reach a milestone of its own as it approaches the 18,000 level.
Much of Wall Street's index gains are led by the endless rise in Big Tech stocks, with Nvidia (NASDAQ 🙂 and Meta (NASDAQ 🙂) the latest champions. The AI revolution has revived the post-pandemic bull market , overshadowing growing doubts about when the Federal Reserve will be able to start cutting rates.
With just over two-thirds of S&P 500 companies reporting earnings, about 75% have beaten their EPS estimates, according to FactSet. While this is only marginally above the 10-year average of 74%, it comes at a time when companies are battling high inflation and borrowing costs that are at their highest level in more than a decade, tensions Geopolitics are high and globalization has receded.
This notion that big tech companies can weather any storm is likely what's keeping the rally alive even as Fed officials put the brakes on the prospect of an imminent rate cut.
Will Fed comments and CPI data keep the positive tone intact?
However, that doesn't mean investors have stopped paying attention to the data. Another reason stocks have been so bullish is that a rate cut is coming at some point this year. So there was relief on Friday when the US Bureau of Labor Statistics made no significant revision to its CPI readings in its annual review of the series.
Core CPI rose at an annualized rate of 3.3% in the fourth quarter, unchanged from the previous estimate, while the month-on-month increase in the headline figure was revised slightly downward to 0.2%. This raises hopes that there will be no upside surprises in tomorrow's January CPI report, where headline inflation is expected to decline from 3.3% to 3.0% year-on-year.
Before that, Fed officials will take center stage, with Governor Bowman and Richmond Fed President Barkin speaking later today.
Dollar steady as yen stabilizes, pound awaits data; gold and oil slip
On the currency front, it's a quiet start to the week, as many markets in Asia are closed today for a holiday, and those in China are closed all week for Lunar New Year celebrations. The US dollar is stable against a basket of currencies after falling earlier in the session. It appears that the rally on the back of the Fed's repricing of rate cut bets from over six to around four and a half has run its course, at least for now.
The yen is somewhat firmer today, likely helped by a fresh warning from Japan's Finance Minister Suzuki that he is “closely watching exchange rate movements” after the currency came under pressure last week when Gov. Bank of Japan's Ueda suggested that an exit from negative rates will not necessarily mean the start of a cycle of rate hikes.
The pound held steady around $1.2620 ahead of what is expected to be a busy week of UK data releases, starting with Tuesday's jobs report.
Gold remained on the defensive even as the rally in Treasury yields paused for breath, while oil futures also fell. Investors may still see some chance of a truce between Israel and Hamas amid ongoing talks despite the latest attacks in Rafah by Israeli forces, and this is weighing slightly on both commodities.