[New York Stock Market] S&P 500 Hits Another Record High... Dow Jones Index Also Surpasses 38,000 Points

The three major indices of the U.S. New York Stock Exchange all closed higher on Monday, the 22nd (local time). The strong momentum of the S&P 500 index, which hit an all-time high last week, continued. This week marks the start of earnings announcements from big tech companies including Netflix and Tesla. Releases of inflation indicators favored by the Federal Reserve (Fed) and preliminary fourth-quarter GDP growth figures are also scheduled.

On this day at the New York Stock Exchange (NYSE), the blue-chip-focused Dow Jones Industrial Average rose 138.01 points (0.36%) from the previous close to finish at 38,001.81. This was the first time the Dow surpassed the 38,000 mark. The large-cap S&P 500 index also climbed 10.62 points (0.22%) to 4,850.43, breaking its previous all-time high set last week. The tech-heavy Nasdaq index ended the session up 49.32 points (0.32%) at 15,360.29.

Within the S&P 500, eight sectors excluding utilities, consumer discretionary, and consumer staples advanced. Department store chain Macy’s rose 3.57% after rejecting acquisition offers from Arkhouse Management and Brigade Capital Management. SolarEdge announced plans to cut 16% of its workforce to reduce costs, pushing its shares up nearly 4%. Apple, which began pre-orders for its Vision Pro, gained over 1%. Nvidia also edged higher, closing near $600 per share. On the other hand, food processing company Archer-Daniels-Midland plunged more than 24% due to disappointing fourth-quarter earnings guidance and the CFO being placed on administrative leave. B. Riley Financial fell over 2% following reports that regulators are investigating customer trades related to securities fraud.

[Image source=Reuters Yonhap News]

Investors are closely watching whether the rally in the New York stock market, led by the S&P 500 hitting record highs, can continue. This week, data releases including December’s Personal Consumption Expenditures (PCE) price index, preliminary fourth-quarter GDP growth, Purchasing Managers’ Index (PMI), and corporate earnings from big tech and other companies are expected. As the market enters a blackout period with no public comments from Fed officials ahead of the January Federal Open Market Committee (FOMC) meeting, investors will likely rely on these indicators and earnings to gauge the future direction of the economy and monetary policy.

CNBC reported, “Wall Street’s strength depends on whether the Fed can successfully guide a soft landing that avoids recession while lowering inflation,” adding, “The series of economic data to be released this week will influence how Fed officials view future monetary policy.”

The core PCE for December, to be released on the 26th, is expected to rise 0.2% month-over-month, slightly above the previous month’s increase. However, it is forecasted to show a 3% year-over-year increase, indicating a slowdown. The preliminary U.S. fourth-quarter GDP, released a day earlier, is estimated to have slowed to around 1.9%. If growth falls short of expectations, concerns about the economic outlook could intensify. However, weaker economic data could also revive market expectations for an early rate cut. If mixed signals emerge, the Fed’s cautious stance is likely to persist.

Market expectations for an early rate cut have somewhat diminished. According to the Chicago Mercantile Exchange (CME) FedWatch tool, the futures market currently prices in about a 41% chance that the Fed will cut rates by at least 0.25 percentage points at the March FOMC meeting after holding steady in January. This is a significant drop from over 80% a week ago. The anticipated timing for the first rate cut has shifted from March to May. This shift reflects stronger-than-expected economic data and growing views that the Fed will be cautious about cutting rates. Recently, Fed officials have repeatedly expressed hawkish views, saying that market expectations for a March rate cut are excessive.

Additionally, this week’s earnings announcements include big tech companies such as Netflix, Tesla, Intel, and IBM. United Airlines reported earnings after the market close on this day. The airline said it expects a loss of 35 to 85 cents per share in the first quarter due to grounding Boeing 737 Max 9 aircraft following a fuselage hole incident. United Airlines operates 79 of these aircraft. Its fourth-quarter revenue was $13.63 billion, and earnings per share were $2, beating market expectations. Alaska Air Group, which experienced a Boeing aircraft accident, will also release earnings this week.

Paul Note of Murphy & Silvestre Wealth Management said, “Looking back over the past two years, Fed actions have driven the market,” but added, “The earnings season starting this week will significantly change market sentiment.” He highlighted that earnings from technology stocks, which have recently seen concentrated buying, will be key. Quincy Crosby, chief strategist at LPL Financial, also noted, “For tech stocks to continue rising, earnings and future guidance are crucial.”

In the New York bond market, Treasury yields declined. The benchmark 10-year U.S. Treasury yield hovered around 4.10%, while the 2-year yield, sensitive to monetary policy, was near 4.39%. The dollar index, which measures the dollar’s value against six major currencies, remained steady around 103.3. The Chicago Board Options Exchange (CBOE) Volatility Index (VIX), known as Wall Street’s fear gauge, edged down slightly to 13.1.

Gold prices fell. Gold futures on the New York Commodity Exchange (COMEX) dropped 0.3% to $2,022.20 per ounce. Gold has weakened recently as expectations for early rate cuts have diminished. However, UBS warned not to underestimate the impact of a Fed policy pivot and forecasted gold prices could rise to $2,250 per ounce by the end of the year.

Oil prices hit a one-month high amid supply concerns. On the New York Mercantile Exchange, February West Texas Intermediate (WTI) crude oil closed at $75.19 per barrel, up $1.78 (2.42%) from the previous day. This closing price is the highest since December 26 of last year.