(Bloomberg) — A rally in big tech stocks fueled by optimism about artificial intelligence and solid profits from big companies has pushed stocks to the brink of all-time highs.
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Stocks have risen further this year, with the S&P 500 at one point exceeding 6,100. Netflix Inc. soared about 10% on the back of its biggest subscriber increase in history. Nvidia Inc. led the rally in mega-cap stocks, while Oracle Corp. soared more than 6.5% on its $100 billion joint venture with SoftBank Group Corp. and OpenAI. The initiative, announced by President Donald Trump, further boosts the outlook for the AI enthusiasts that have supported the bull market. .
Steve Sosnick of Interactive Brokers said: “The promise of a huge pool of capital for AI investing, whether fully funded or not, will once again encourage investors to invest in artificial intelligence and everything related to it. It's enough to get people excited about things.”
Recently, most of the S&P 500 constituents have actually fallen, despite trying to expand the market beyond a handful of tech mega-cap stocks. The narrow range is a major concern for investors, especially those worried about soaring valuations and frothy AI stocks.
JPMorgan Chase & Co. chief Jamie Dimon said there are signs the U.S. stock market is overheating.
“Asset prices are going up in some ways,” Dimon told CNBC. “You need pretty good results to justify that price.”
The S&P 500 rose 0.6%. The Nasdaq 100 rose 1.3%. The Dow Jones Industrial Average rose 0.3%. Bloomberg's “Magnificent Seven'' mega-cap stocks rose 1.3%. The Russell 2000 fell 0.6%. Travelers Company and Procter & Gamble rose after strong financial results.
The yield on the 10-year U.S. Treasury rose 2 basis points to 4.6%. The Bloomberg Dollar Spot Index was shaken.
“Markets are reacting positively to the first wave of Trump policy, with investors breathing a sigh of relief at tariff announcements and the early stages of earnings season, but showing enthusiasm reminiscent of pre-election times,” Mark Hackett said. ” Nationwide. “After a volatile earnings season in recent quarters, a new all-time high would energize the bulls,” he concluded.
For Miller Tabak's Matt Maley, if this year's earnings season is a good one, it could be a rally with some legs. But simply “exceeding expectations” is not enough to drive significant further progress.
“We remain risk-on and expect earnings to drive the stock higher,” said Jean Boivin and Wei Li, strategists at BlackRock Investment Institute. “Even in a rising interest rate environment, we think stocks can continue to rise as long as fundamentals are strong.”
After the S&P 500 index soared 24% in 2023 and 23% in 2024, high valuations have sparked debate about whether the benchmark can achieve that kind of performance again this year.
Just because the S&P 500 index has risen more than 20% annually doesn't necessarily mean that U.S. stocks will fall. That's because history has shown that the market has typically continued to deliver solid, albeit more modest, returns the following year. ” he said. Jeff Schultz of ClearBridge Investments. “Furthermore, the current bull market is far from the longest without a correction.”
Schultz also noted that earnings growth in recent years has been largely concentrated in a small group of stocks. This is expected to change in 2025 due to increased earnings participation, which is expected to lead to improved relative performance for small- and mid-cap stocks and value laggards.
“While we continue to monitor the new administration's next moves, investors should not lose sight of the fundamentals that continue to be favorable for U.S. stocks,” said Solita Marcelli of UBS Global Wealth Management. “Without a single name view, we continue to like technology, utilities and financials, and see value in leveraging structured strategies to weather short-term volatility. Masu.”
John Creekmar of Creekmar Wealth Advisors said the stock market's “January effect” has materialized so far, with stock prices holding steady throughout the month.
“Investors are currently placing more emphasis on expectations for profits, tax cuts, and deregulation from the new Trump administration, and less weight on concerns that the Federal Reserve will reduce interest rate cuts this year,'' he said. “I haven't done it,” he pointed out.
Company highlights:
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Netflix reported its biggest quarterly increase in subscribers ever, driven by its first major live sports event and the return of Squid Games.
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Salesforce Inc. CEO Marc Benioff said the company will see “thousands” of deals for its new Agentforce AI product this fiscal quarter.
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Samsung Electronics plans to launch an ultra-thin version of its Galaxy S25 phone in the first half of this year, beating Apple into a promising new field.
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Alphabet Inc.'s Google has won a British court ruling that prevents a Russian media company from seizing the tech giant's global assets to recover fines imposed by a Russian court. Those fines are now yielding interest worth many times the sum of the world economy.
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United Airlines Holdings expects the airline to capitalize on strong winter demand and generate strong first-quarter profits in a surprising change from the typically weak travel period.
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Procter & Gamble's organic sales exceeded expectations due to higher volumes, a change from the previous quarter, when most of the company's growth came from price increases.
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Johnson & Johnson warned Wall Street about the dangers of a strong dollar. Pharmaceutical and medical device makers now say analysts didn't get the message.
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Abbott Laboratories expects full-year profit to be in line with Wall Street expectations despite lower-than-expected first-quarter profit as the company points to strong demand for its medical devices as a driver of growth this year I am doing it.
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Ally Financial's fourth-quarter profit rose sharply as its net interest margin beat analysts' expectations, as well as lower expenses and loan loss reserves.
This week's main events:
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Eurozone consumer confidence, Thursday
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U.S. unemployment claims Thursday
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Bank of Japan policy meeting, Friday
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Eurozone HCOB Manufacturing and Services PMI, Friday
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University of Michigan Consumer Sentiment, Used Home Sales, S&P Global Manufacturing PMI, Friday
The main movements in the market are:
stock
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As of 4 p.m. New York time, the S&P 500 was up 0.6%.
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Nasdaq 100 rose 1.3%
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The Dow Jones Industrial Average rose 0.3%.
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MSCI World Index rose 0.5%
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Bloomberg Magnificent 7 Total Return Index rose 1.3%
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Russell 2000 index down 0.6%
currency
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Bloomberg Dollar Spot Index little changed
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The euro fell 0.2% to $1.0412.
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The British pound fell 0.3% to $1.2317.
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The Japanese yen fell 0.7% to 156.54 yen to the dollar.
cryptocurrency
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Bitcoin fell 2.3% to $104,337.28.
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Ether fell 2.3% to $3,255.98.
bond
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The 10-year Treasury yield rose 2 basis points to 4.60%.
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Germany's 10-year bond yield rose 2 basis points to 2.53%.
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The UK 10-year bond yield rose 4 basis points to 4.63%.
merchandise
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West Texas Intermediate crude oil fell 0.5% to $75.43 a barrel.
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Spot gold rose 0.4% to $2,756.78 an ounce.
This article was produced in partnership with Bloomberg Automation.
–With assistance from Cecile Gutscher, Sujata Rao, Robert Brand, and Aya Wagatsuma.
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