Stocks headed toward all-time highs as oil fell after President Donald Trump urged OPEC to lower crude prices and said he will push for interest-rate cuts.
A drop in oil, which tends to ease concerns about inflation, pushed the policy-sensitive two-year yield down. More than 300 shares in the S&P 500 rose, with the gauge topped 6,100.
Gains were capped by a rout in global chipmakers after SK Hynix Inc.’s outlook failed to inspire artificial-intelligence bulls and as ASML Holding NV tumbled on worries over further U.S. export controls. American powerhouses Nvidia Corp. and Broadcom Inc. also fell.
Trump said he would ask Saudi Arabia and other OPEC nations to “bring down the cost of oil” and reiterated his threat to use tariffs to bring manufacturing back to the US as he addressed world leaders in Davos.
He said he would demand an immediate drop in rates. Separately, Trump said he signed executive actions related to cryptocurrency and AI. No further details were immediately available.
Traders eagerly anticipating fresh insights into Trump’s trade policies, got a more moderate tone regarding tariffs, which helped “soothe investor nerves,” according to Fawad Razaqzada at City Index and Forex.com.
“Trump, rightly or wrongly, wants to see a positive supply shock in the energy sector,” said Neil Dutta at Renaissance Macro Research. “That in turn will bring down inflation expectations, which in turn, will bring down rates.”
The S&P 500 added 0.3%. The Nasdaq 100 was little changed. The Dow Jones Industrial Average rose 0.8%.
A Bloomberg gauge of the “Magnificent Seven” slipped 0.2%. The Philadelphia Stock Exchange Semiconductor Index fell 0.8%. The Russell 2000 rose 0.4%.
The Bloomberg Dollar Spot Index slid 0.3%. The yen climbed, with the Bank of Japan expected to raise its benchmark rate Friday by the most in 18 years. The yield on 10-year Treasuries advanced three basis points to 4.64%.
Investor Views
“If Trump can enact pro-growth measures while inflationary pressures abate, a rotation into cyclicals, smaller-cap names, and non-U.S. assets is likely to materialize,” said Hal Reynolds at Los Angeles Capital Management.
However, given the heightened levels of policy risk, the firm’s “Dynamic Alpha Stock Selection Model” continues to slightly prefer larger cap companies across the globe whose strong returns can be justified by their fundamentals.
To James Demmert at Main Street Research, the stock market is in a “calm before the storm mode” ahead of next week’s Federal Reserve decision press conference and the start of the big-tech earnings season — “both of which are likely to cause market volatility.”
Demmert sees any further consolidation or correction in stocks as an opportunity for investors.
“We are still early in the AI and technology-led business cycle and bull market, which is now roughly two years old, and may last for another five years,” he noted.
The S&P 500’s recent leg higher missed an important ingredient: inflows from big-money managers. For those betting on a further rally, that’s a welcome development.
A measure of aggregate positioning among rules-based and discretionary investors fell to a two-month low, according to Deutsche Bank AG’s data.
And commodity trading advisors cut their long stock exposure to the level last seen in the aftermath of a market rout in August, data compiled by Goldman Sachs Group Inc.’s trading desk show.
From a contrarian perspective, such skepticism bodes well for stock-market bulls because it means more dry powder to buy equities down the road, should the biggest fears fail to materialize.
“We continue to expect near-term volatility,” said Mark Haefele at UBS Global Wealth Management. “But we also believe U.S. equities have room to grind higher as growth momentum continues.”
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