S&P 500 closes at first record high in two years as tech fuels U.S. stocks

What drove markets

U.S. stocks rose sharply on Friday, with the S&P 500 surpassing its previous all-time closing peak of 4,796.56, reached Jan. 3, 2022.

Stock-market investors are still “pricing in a soft landing” for the U.S. economy, said Matt Stucky, chief portfolio manager at Northwestern Mutual Wealth Management Co., in a phone interview Friday.

Investors were digesting fresh economic data that included a positive reading from the University of Michigan’s consumer-sentiment gauge for January. The preliminary reading of the sentiment survey shot up to 78.8, from 69.7 in December, to reach the highest level since July 2021.

“Better consumer confidence is a good thing for the economy,” Stucky said. “More confident consumers are more likely to spend and keep the economy pretty resilient.”

Chicago Federal Reserve President Austan Goolsbee said Friday morning that the Fed could start cutting interest rates this year “if we continue to make surprising progress on inflation.” He was speaking in an interview with CNBC.

“We don’t want to commit ourselves before the job is done,” Goolsbee said. But “as inflation comes down, that opens the door to a reduction in restrictiveness.”

See: Goolsbee says it’s too soon to determine when Fed will cut interest rates

Meanwhile, technology was the best-performing sector in the S&P 500 index on Friday, with a gain of more than 2%, according to FactSet data.

The Invesco QQQ Trust Series 1
QQQ,
an exchange-traded fund that tracks the Nasdaq-100 index, rose to around $421 on Friday. At that level, the ETF saw a new record high, according to Dow Jones Market Data.

The Nasdaq-100 index was helped along by gains from semiconductor companies Nvidia Corp.
NVDA,
+4.17%
and Broadcom Inc.
AVGO,
+5.88%.

That’s after better-than-expected results from chip-making giant Taiwan Semiconductor Manufacturing Co.
TSM,
+1.04%
on Thursday helped drive a sharp gain for the tech-heavy Nasdaq Composite. Semiconductors got another boost on Friday after the latest sales guidance released by Super Micro Computer Inc.
SMCI,
+35.94%.

Markets entered 2024 with expectations for six or seven interest-rate cuts by the Fed this year. Those expectations have seen pushback, especially given strong economic data, such as retail-sales data, reported earlier this week.

In “a soft-landing scenario, you’re unlikely to see those six cuts come to fruition,” Stucky said, adding that Treasury yields have been “grinding higher,” reflecting a resilient economy.

The yield on the 10-year note
BX:TMUBMUSD10Y
was little changed on Friday at 4.145%, but it has climbed more than 28 basis points this year, based on 3 p.m. Eastern time levels, according to Dow Jones Market Data.

After the U.S. stock market “took a pause” this month, the S&P 500 can probably keep rising in 2024 following a fresh record high, Keith Lerner, co-chief investment officer at Truist Advisory Services, said in a phone interview Friday. Even though the index took a break in January, “there’s been an underlying bid for the market” and “a lack of intense selling,” he said.

U.S. companies in the S&P 500 index are largely beating analysts’ expectations so far this earnings season. Of the 52 companies in the S&P 500 that have already reported earnings for the final three months of 2023, 84.6% beat analysts’ expectations, according to data from LSEG.

In other economic data released on Friday, existing-home sales for December fell 1%.

“Right now, the economy, earnings and the credit markets continue to show resilience,” Lerner said. He said he’s overweight large-cap stocks in the U.S. and views the pullback in small-cap stocks this month as a good “entry point” for those who may have missed their rally late last year. 

“This market rally is buying into that soft landing,” he said. “If we don’t have that soft landing, we’re going to have challenges.”

Companies in focus

• Shares of Wayfair Inc.
  W,
  +10.28%
  jumped 10.3% after the company announced another round of layoffs.

• Super Micro Computer Inc.
  SMCI,
  +35.94%,
  a manufacturer of computer products, saw its shares surge 35.9% after the company released a sales outlook that was far stronger than Wall Street had expected.  

• Shares of Roomba maker iRobot
  IRBT,
  -26.93%
  sank 26.9% following reports that European antitrust regulators planned to block a planned buyout by Amazon.com Inc.

• Shares of Travelers Cos.
  TRV,
  +6.72%
  jumped 6.7% after the property-casualty insurer said lower catastrophe losses and higher underwriting gains helped produce record profits.

Barbara Kollmeyer contributed.