Wall Street stocks hit an all-time high on Friday, with strong gains for big technology companies pushing the main US stock index to a new record high after a shaky start to the year.
The S&P 500 rose 1.2 percent to close at 4,839.81, surpassing the previous record set on January 3, 2022. Its intraday value also reached a new high of 4,842.07 during the trading session.
The S&P has been within striking distance of records for a month, after a sharp rally at the end of 2023.
However, markets have lost momentum since the turn of the year, as disappointing economic data dampened optimism about how quickly the US Federal Reserve will start cutting interest rates. Even after Friday’s rise, the S&P was up just 1.5 percent in January, compared with a 16 percent rise over nine straight weeks of gains since late October.
Many investors said they expect markets to continue to be volatile, but are optimistic they will trend higher in the coming months.
“If the economy continues to grow — which we expect — and if inflation continues to trend downward, that should be very good for the average stock,” said Jeff Mills, chief investment strategist at Bessemer Trust.
“You may not have another 20 or 25 percent increase (in the index), but it is an environment that will allow earnings to shine and slowly push the market higher for what could be another strong year.”
The Nasdaq Composite, which is dominated by technology stocks, has risen nearly 20 percent since late October, but will need to gain another 5 percent to surpass its record closing level.
Much of the rise since October has been driven by changing interest rate expectations, with investors betting that lower inflation will allow the Federal Reserve to start cutting interest rates. Low interest rates tend to boost stocks by reducing the attractiveness of low-risk assets such as Treasuries.
Meanwhile, investors are hoping that corporate profits will begin to rebound as the US central bank manages to control inflation without causing a severe recession.
This upbeat mix helped drive broad gains across the stock market, with small caps outperforming the so-called ‘magnificent seven’ tech groups that dominated gains earlier in 2023.
However, the final gains that took the S&P to a record high this week were again driven by the large technology groups that are heavy weights in the index, with Meta, Microsoft and Nvidia all closing at new highs on Friday. The equal-weighted version of the S&P 500 is down 1 percent so far this year.
This lack of breadth has raised expectations that the outlook could be bumpy. “A rally led by seven to 10 stocks is not the rally that most people think can last three years,” said Ronald Temple, chief market strategist at Lazard.
However, he added: “What still gets me excited about the US stock market is that much of the market is still reasonably priced.”