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  • Writer's pictureJade Rossback

The S&P 500 Enters a Bull Market

The S&P 500 Enters a Bull Market
Bull Market

Up through last week, information pertaining to stock market moves have largely come from economic data and the Fed’s interpretation of it, year to date. This week, with the next Federal Open Market Committee (FOMC) meeting scheduled for a week from tomorrow, we won’t be hearing from any members of the monetary policy body. But Q4 earnings pick up this week, and by Friday we’ll see the Fed’s preferred measure of inflation: Personal Consumption Expenditures (PCE).

Ahead of all this — there are no major economic reports due out until December Leading Economic Indicators after the opening bell — pre-market futures continue to bob higher overall: the Dow is +89 points, the S&P 500 is +14 and the tech-heavy Nasdaq is +85 points. These are off earlier-morning highs which saw the Nasdaq in triple-digits, but the S&P 500 still rides new all-time highs at 4886.50. Market participants are setting a relatively high marker ahead of the deluge of data we’re soon to see.

Earnings season brings us some real marquee names this week, including Netflix (NFLX) Tuesday afternoon, Tesla (TSLA) Wednesday after the bell and Intel (INTC) Thursday once regular markets have closed. For Q4 earnings results posted so far, the main sector is Finance, which to this point has reported +6.3% earnings growth year over year and +2.3% higher revenues, according to Zacks Director of Research Sheraz Mian in his latest Earnings Preview report. Importantly, Sheraz says the data currently does not point to an earnings recession over the coming three quarters.

In terms of economic prints, we’re again late-week heavy: aside from Weekly Jobless Claims Thursday morning, Durable Goods, Retail/Wholesale Inventories and New Home Sales will hit the tape. On Friday, December PCE numbers will be out, with core year over year expected to tick down 20 basis points (bps) to +3.0% — appreciably lower than the September 2023 cycle high +5.5%. Friday will also bring us Pending Home Sales; this housing data has been among the surprisingly strongest areas of the economy over the past several months.

Thus, we appear set up for continued complimentary economic news — that which will not force the Fed’s hand to cut interest rates anytime soon. While even the most pro-cut analysts tended not to foresee a move lower at the January FOMC meeting, currently revisions are being made for the following (March) meeting, as well. This would leave the April/May, June or July FOMC pow wows to introduce the Fed’s first rate cut since it slashed -1.00% mid-March 2020, at the onset of the Covid pandemic. Currently, rates have been steady at 5.25-5.50% since late July of last year.

Recent Highlights

Existing Home Sales decreased to 3.78 million units (01/19)

Consumer Sentiment increased to 78.8 (01/19)

Crude Inventories decreased by 2.5 million bpd (01/18)

Initial Claims decreased 187,000 (01/18)

Upcoming Releases

Crude Inventories (01/24 at 10.30 AM EST)

Initial Claims (01/25 at 8.30 AM EST)

Durable Orders (01/25 at 8.30 AM EST)

New Home Sales (01/25 at 10.00 AM EST)

Market News

Wall Street closed sharply higher on Friday, led by tech stocks. A tech rally fueled by chipmaker stocks and optimism around artificial intelligence pulled their weight. All three major stock indexes ended in the green.

How Did the Benchmarks Perform?

The Dow Jones Industrial Average (DJI) rose 395.19 points, or 1.1%, to close at 37,863.80. Twenty-five components of the 30-stock index ended in positive territory, while five ended in negative.

The tech-heavy Nasdaq Composite gained 255.32 points, or 1.7%, to close at 15,310.97.

The S&P 500 added 58.87 points, or 1.2%, to close at 4,839.81. Nine of the 11 broad sectors of the benchmark index closed in the green. The Technology Select Sector SPDR (XLK), the Financials Select Sector SPDR (XLF) and the Communication Services Select Sector SPDR (XLC) advanced 2.3%, 1.6% and 1.4%, respectively, while the Consumer Staples Select Sector SPDR (XLP) declined 0.3%.

The fear-gauge CBOE Volatility Index (VIX) decreased 65.9% to 13.30. A total of 12.3 billion shares were traded on Friday, higher than the last 20-session average of 11.5 billion. Advancing issues outnumbered the declining ones on the S&P 500 by a 2.9-to-one ratio. The S&P 500 recorded 60 new highs and three new lows, while the Nasdaq posted 97 new highs and 191 new lows.

The S&P 500 Enters a Bull Market

Having fallen to a historic low in October 2022, Friday’s gain technically meant that, by one measure, the S&P 500 had entered a bull market. This was officially confirmed by the benchmark index.

Between its January 2022 high and the October low, the S&P 500 had fallen 25% and was in the bear region. Friday marks a remarkable turnaround and lifted investor mood.

Semiconductor Rally and AI Optimism Lead the Session’s Gains

Super Micro Computer, Inc. (SMCI) ramped up its second-quarter profit forecast, and its shares skyrocketed by rising 35.9%, sending chipmaker stocks to scale dizzy heights. The rising demand for chips used in the artificial intelligence segment also contributed to the increasing stock prices for the sector.

Consequently, shares of NVIDIA Corporation (NVDA) and Advanced Micro Devices, Inc. (AMD) soared 4.2% and 7.1%, respectively. NVIDIA carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Weekly Roundup

Last Friday, the three widely followed indexes closed out a second straight winning week. The Dow Jones Industrial Average, the S&P 500 and the tech-heavy Nasdaq Composite gained 0.7%, 1.2% and 2.3%, respectively. Expectations of a Fed rate cut of at least 25 bps in March moved down to 52% to close out the week, according to CME's FedWatch Tool.

Economic Data

The National Association of Realtors reported that existing home sales for December had come in at 3.78 million units, down 1% from November. In the month prior, it had come in at 3.82 million units.

Per the University of Michigan, consumer sentiment for January came in at an unexpectedly high level of 78.8, against a consensus of 69.7 for the period. The number reported for December remained unchanged at 69.7.

Corporate Summary

Shares of Apple Inc. (AAPL) shot up 1.6% on the broader tech rally.

The Travelers Companies, Inc.’s (TRV) shares jumped 6.7% after reporting fourth-quarter adjusted earnings of $7.01 per share, beating the Zacks Consensus Estimate of $5.04 per share.

Shares of Bank OZK (OZK) gained 4.4% after reporting fourth-quarter adjusted earnings of $1.50 per share, beating the Zacks Consensus Estimate of $1.46 per share.

PepsiCo, Inc.’s (PEP) shares lost 0.8% on consumer staples becoming the biggest losing sector in the session.

*Content provided by Zacks Investment Research. An American company dedicated to the production of independent research and investment-related content. It was founded in 1978 by Len Zacks, based on his insights while pursuing his Ph.D. at MIT.

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