Stocks experienced a surge on Friday following the release of a revised inflation report for December, which indicated lower inflation than previously stated.
As a result, the S&P 500 index surpassed the significant milestone of 5,000 points, buoyed by robust corporate earnings and positive economic updates.
The S&P 500 index ascended by 0.57%, concluding the day at 5,026.61 points, while the Nasdaq Composite index soared by 1.25%, reaching a closing value of 15,990.66 points.
Conversely, the Dow Jones Industrial Average saw a slight decline of 54.64 points or 0.14%, settling at 38,671.69 points.
Over the week, the S&P 500 index rose by 1.4%, and the Nasdaq Composite index increased by 2.3%, whereas the Dow Jones Industrial Average remained relatively unchanged.
This marked the fifth consecutive week of gains for all three major indices, with 14 out of the past 15 weeks being positive.
Dana D’Auria, co-chief investment officer at Envestnet, emphasized the ongoing positive developments in the economy, stating, “At the end of the day, we’re still seeing whopping good news on an economic front, and the market is reacting to that.”
She highlighted the significance of the narrative unfolding, noting, “The longer that story plays out, the more likely it seems to the market that we actually are sticking a landing here.”
The 2024 market rally has been fueled by a combination of factors, including a robust earnings season, encouraging inflation figures, and a resilient economy.
This surge has propelled the S&P to a significant milestone, closing above the 5,000 level for the first time, following its initial touch of this mark during Thursday’s trading session. Notably, the index had previously surpassed the 4,000 mark back in April 2021.
“A close above this closely watched level will undoubtedly create headlines and further feed fear of missing out (FOMO) emotions,” said Adam Turnquist, chief technical strategist at LPL Financial.
“Outside of a potential sentiment boost, round numbers such as 5,000 often provide a psychological area of support or resistance for the market,” he added.
In December, a downward revision in the consumer price index (CPI) provided a boost to market sentiment. The government revised the figure to show a 0.2% increase, a slight dip from the initially reported 0.3% increase.
Core inflation, which excludes volatile food and energy prices, remained unchanged. Investors are now awaiting the release of January’s CPI figures next week.
On Friday, Megacap technology stocks continued their upward trajectory, contributing to the S&P’s climb above 5,000. Nvidia saw a notable gain of 3.6%, while Alphabet added over 2% to its value.
Cloudflare experienced a significant surge of 19.5% driven by strong earnings, which also uplifted the broader cloud sector. Semiconductor stocks followed suit, with the VanEck Semiconductor ETF (SMH) recording a modest increase of 2.2%.
In the latter part of the fourth-quarter earnings season, PepsiCo saw a decline of 3.6% amid mixed results.
Similarly, Take-Two Interactive experienced an 8.7% slump due to a disappointing outlook, and Pinterest dropped by 9.5% following a weaker-than-anticipated forecast and missing revenue estimates.
Despite these setbacks, earnings have exhibited more resilience than anticipated thus far. LSEG reports that out of the 332 S&P companies that have disclosed their results, approximately 81% have surpassed analyst expectations.
This contrasts with the usual quarterly beat rate of 67% since 1994.
