The stock market experienced a surge in megacap tech stocks on Friday, lifting both the S&P 500 and Nasdaq. The S&P 500 reached above the 5,000 level, extending its record high. This boost came after the revised inflation reading for December came in lower than initially reported. Nvidia saw a jump of 3.6% and hit an intraday record high, while other tech-focused giants like Microsoft, Amazon, and Alphabet also scored gains. The encouraging data on inflation from the U.S. Bureau of Labor Statistics further supported the rally. The annual revisions to the consumer price index showed that core consumer prices rose at a 3.3% annualized rate in the fourth quarter of 2023, remaining unchanged from the previous reading. These revisions eased concerns about inflation and gave the Federal Reserve more leeway. The resilient economy, solid earnings season, and easing inflation data contributed to the market rally, with the three major averages posting their fifth consecutive weekly gains.
Looking ahead to the weekend, the Kansas City Chiefs will face the San Francisco 49ers in a rematch of Super Bowl LIV. Viewership for the game is expected to be high, potentially surpassing 118 million viewers. Additionally, the Las Vegas Strip will be in the spotlight as hotel room rates have been soaring in anticipation of the event. Legal wagers on the Super Bowl are predicted to exceed $1.35 billion across the regulated U.S. markets, though sportsbooks may struggle to maintain balance. In related news, Walt Disney, Fox, and Warner Bros. Discovery announced a new partnership for a streaming platform that will share sports assets.
Concerns about the health of commercial real estate properties and the bank loans supporting them have intensified this week. Moody’s Investors Services downgraded New York Community Bancorp’s credit rating to junk due to financial, risk-management, and governance challenges. The lender’s stock plummeted 16.7% in after-hours trading and had declined 22.2% during regular trading. The surprise quarterly loss and provisions for credit losses, along with worries about commercial real estate, contributed to the stock’s decline.
Disney experienced a boost in its stock on Wednesday, gaining 6.7% after posting earnings that exceeded expectations and offering positive guidance. Despite losing 1.3 million core subscribers sequentially on the Disney+ streaming service, the result was expected due to price hikes. CEO Bob Iger expressed confidence in the company’s renewed strength across all its businesses and highlighted plans to boost shareholder returns. Disney also announced a 50% increase in its semi-annual dividend and plans to repurchase shares for the first time since fiscal 2018.
On Thursday, U.S. stocks ended slightly higher, with the S&P 500 briefly crossing the historic 5,000-point mark. The robust earnings season, coupled with healthy spending patterns among consumers and businesses, contributed to the market’s positive performance. The momentum in artificial intelligence also justified the high valuations seen in the tech sector. However, the key question remains whether the market will continue to be driven by a handful of mega-cap tech names or if the rally will broaden and include a wider range of stocks.
Investors are hopeful for a rescue of Chinese stocks following the recent decline that wiped out $7 trillion from mainland equities and shares in Hong Kong since their peaks in 2021. Reports indicate that regulators will soon update authorities on a range of policy initiatives, while the country’s top securities chief was replaced before the Lunar New Year. Measures to stabilize the property market and direct stimulus are expected to provide support. Investors will be looking for concrete actions or a coordinated response to address their concerns.
Overall, the markets continue to experience positive momentum driven by a combination of factors such as easing inflation, a resilient economy, solid earnings, and positive sentiment toward tech stocks. However, concerns remain about the health of commercial real estate properties, particularly in light of downgrades to credit ratings. The outlook for Chinese stocks is also uncertain, but hopes for a recovery persist.
