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Wall Street stocks hit an all-time high on Friday, with strong gains for large technology companies finally pushing the index to a new record after a shaky start to the year.
The S&P 500, the main US equity benchmark, reached 4,824.19, rising 0.9 per cent on the day to overtake the previous intraday record set on January 4, 2022.
The index had been within touching distance of the record for a month, after a blistering rally at the end of 2023.
However, markets have lost momentum since the turn of the year, as disappointing economic data damped optimism about how quickly the US Federal Reserve will start cutting interest rates. Even after Friday’s rise, the S&P is up just 1 per cent in January, compared with a 16 per cent rally over nine consecutive weeks of gains from late October.
Several investors said they expect markets would continue to be choppy, but were optimistic that they would trend upward in the coming months.
“If the economy continues to grow — which we expect it will — and if inflation continues to trend down, that should be quite good for the average stock,” said Jeff Mills, chief investment strategist at Bessemer Trust.
“You may not have another 20 or 25 per cent increase [in the index], but it’s an environment that will allow earnings to shine through and slowly push the market higher for what could be another solid year.”
The Nasdaq Composite, which is dominated by tech stocks, has also risen almost 20 per cent since late October, but would need to gain a further 5 per cent to surpass its record closing level.
The bulk of the rally since October was driven by changing rate expectations, as investors bet that falling inflation would allow the Fed to start cutting rates. Lower interest rates tend to boost stocks by reducing the appeal of lower-risk assets such as Treasury bonds.
At the same time, investors are hoping that corporate earnings will start to rebound as the US central bank manages to bring inflation under control without causing a severe recession.
That optimistic combination helped drive broad gains across the stock market, with smaller companies outperforming the so-called Magnificent Seven tech groups that had dominated gains earlier in 2023.
However, the final gains bringing the S&P to a record this week were once again driven by large tech groups with heavy weightings in the index. The equal-weighted version of the S&P 500 has fallen back 2 per cent so far this year.
That lack of breadth has added to expectations that the outlook could be bumpy. Ronald Temple, chief market strategist at Lazard, said: “A rally driven by seven to 10 stocks is not one most people think can last three years.”
Yet, he added: “What still gets me excited about the US equity market is a lot of the market is still reasonably priced.”