Stocks Closes on the Brink of Historic 5,000 Mark

The historic rally in U.S. stocks continued to power ahead, with the S&P 500 closing within a striking distance of its 5,000 milestone.

Gains on Wednesday were fueled by a renewed surge in big tech and a strong sale of 10-year Treasuries that dimmed supply concerns. While bonds barely budged, equities extended their bull run on prospects that a solid economy will continue fueling corporate profits. In late trading, Walt Disney Co. and Arm Holdings Plc jumped on upbeat outlooks.

Traders shrugged off concerns about lofty valuations, February’s weak seasonality and cautious commentary from Federal Reserve officials — with stocks hitting fresh records.

That positive tone in equities continued to prevail after the U.S. government sold a record $42 billion of 10-year Treasuries at a lower-than-anticipated yield — a sign of confidence the Fed will pivot to rate cuts this year.

“The market continues to climb the wall of worry, including shifting Fed expectations, geopolitical tension, and overbought market conditions,” said Mark Hackett at Nationwide. “We are entering a sluggish seasonal period, but the market has strong momentum.”

Also on Wall Street’s radar was a raft of central bank speakers — all showing no rush to cut rates as already signaled by Fed Chair Jerome Powell.

Governor Adriana Kugler presented an optimistic case for a continued slowdown inflation while indicating little urgency to reduce borrowing costs.

Fed Bank of Boston President Susan Collins said she’s looking for more evidence that inflation is durably set to align with the target before moving to cut rates — though that step is likely “later this year.” Her Minneapolis counterpart Neel Kashkari told CNBC that said officials need to see “a few more months” of inflation data before easing policy.

“Our base case is still for a soft landing where growth slows throughout the year, but remains healthy overall, while inflation does not prove to be overly sticky,” said Solita Marcelli at UBS Global Wealth Management. “And we do believe this environment will allow the Federal Reserve to start cutting rates by May, and by 100 basis points through year-end.”

Following the steps of all major U.S. equity benchmarks, the MSCI World Index of developed-market shares also rose to a record.

Resilient economic growth in the U.S. and an expected rebound in Europe are likely to support equities — even as some parts of the stock market look “frothy,” according to Barclays strategists led by Emmanuel Cau.

While one of the world’s largest exchange-traded funds sits at a crucial inflection point following a torrid 22% rally since late October, further gains may be in store in the coming weeks.

The $244 billion Invesco QQQ Trust Series 1 (QQQ), which that tracks the Nasdaq 100, is trading near key resistance levels from three years ago relative to the broader SPDR S&P 500 ETF, better known by its ticker SPY.

If resistance from February 2021 is decisively pierced, the QQQ/SPY ratio is poised to rally more from here, with bullish confirmation for QQQ on absolute basis climbing to a new high, according to Anthony Feld at Bloomberg Intelligence.

Some of the main moves in markets: The S&P 500 rose 0.8% as of 4 p.m. New York time; the Nasdaq 100 rose 1%; the Dow Jones Industrial Average rose 0.4%

This story was produced with the assistance of Bloomberg Automation.

 (Credit: Adobe)

Copyright 2024 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.