U.S. Stocks Inch Up as Wall Street Reflects on Historic Week
U.S. stocks showed modest gains on Monday as Wall Street digested the previous week’s historic achievements. The S&P 500 index reached new milestones, surpassing the 5,000-point mark for the first time ever. The Nasdaq Composite, known for its tech-heavy focus, also made gains and is poised to set a new record closing high after more than two years.
At mid-day trade, the Nasdaq Composite advanced by 0.43% to 16,059.43 points. The Dow Jones Industrial Average (DJI) also saw a rise of 0.54% to 38,881.30 points. The S&P 500 climbed 0.38% to 5,045.50 points.
Despite the overall positive sentiment, the Health Care sector was the only one showing a decline among the 11 sectors on the S&P 500.
The recent surge in stock prices can be attributed to the strong performance of technology stocks, including the so-called “Magnificent 7” club of companies. Notably, chip giant Nvidia briefly surpassed retail giant Amazon in market value, becoming the fourth largest publicly listed U.S. firm.
Investors will be closely watching key economic data releases and Federal Reserve speeches throughout the week. On Tuesday, the consumer price index (CPI) report will be a key indicator for market participants trying to gauge when the Fed might begin cutting interest rates. Thursday’s retail sales data will also provide insights into the strength of the economy and consumer spending.
JPMorgan’s Michael Feroli offered some predictions regarding the upcoming data releases. He expects a decline in energy prices to limit the January CPI headline figure to a mere 0.1% increase, down from 3.4% in December. In terms of retail sales, Feroli anticipates a 0.9% decline in total sales and expects flat sales in the important control category due to seasonal adjustment factors. Additionally, he foresees a 0.2% increase in the ex-food and energy core measure, although this could be held down by an expected decline in used vehicle prices.
On Monday, the economic calendar was light, but one favorable indicator did come in the form of the New York Fed’s survey of consumer expectations for January. The survey revealed that three-year ahead inflation expectations returned to their lowest levels seen before the COVID-19 pandemic, providing some reassurance. Treasury yields, much like stocks, made minor movements at the start of the week, with the longer-end 30-year yield staying relatively unchanged at 4.38%, the 10-year yield dropping 1 basis point to 4.18%, and the shorter-end 2-year yield also decreasing by 1 basis point to 4.47%.
Furthermore, Monday lived up to its reputation as “merger Monday” with two significant deal announcements. Diamondback Energy agreed to merge with Endeavor Energy Resources, creating the largest privately-held oil and gas company in the Permian Basin. The deal is valued at approximately $26 billion. Diamondback Energy’s stock surged by over 10% and was among the top percentage gainers on the S&P 500. Another notable deal involved Gilead Sciences acquiring CymaBay Therapeutics for a total equity value of $4.3 billion, causing CymaBay’s shares to soar by 25%.
While the fourth quarter earnings season will continue to be in focus this week, the volume of companies reporting is expected to decrease. Additionally, market watchers will be paying attention to 13F filings, which disclose major funds’ quarterly equity ownership changes.
Analyst comment
Positive news.
The market is expected to remain bullish as U.S. stocks inch up and set new records. Technology stocks, particularly the “Magnificent 7” club, are driving the surge. Key economic data releases and Federal Reserve speeches will be closely watched. Potential decline in energy prices may limit CPI increase, while retail sales data will provide insights into the strength of the economy. Merger announcements and positive earnings reports will also influence market sentiment. Overall, the market is likely to continue its upward trend.
