US Stock Markets Rally on Tech Surge and Positive Economic Signals
The S&P 500 Index ($SPX) (SPY) closed Friday up +1.26%, the Dow Jones Industrial Average ($DOWI) (DIA) up +0.80%, and the Nasdaq 100 Index ($IUXX) (QQQ) up +1.67%. March E-mini S&P futures (ESH25) rose +1.17%, while March E-mini Nasdaq futures (NQH25) increased by +1.52%.
Market Boosted by Tech Giants and Positive Fed Commentary
On Friday, stocks saw moderate gains, driven largely by strong performances from major technology firms and chip manufacturers. The momentum built after Richmond Fed President Barkin remarked, “Inflation is not yet back to target, so we still have more work to do, but we don’t think we need to be as restrictive as we once were to finish that job.”
Political Developments Impact Stock Performance
The stock market hit new highs following Louisiana Republican Mike Johnson’s reelection as Speaker of the House. His position may facilitate the passage of President-elect Trump’s pro-business policies.
Despite some volatility, stocks held their ground even as Treasury yields climbed due to a stronger-than-expected US Dec ISM manufacturing report, which is seen as a hawkish signal for Federal Reserve policy. Additionally, Barkin pointed out ongoing risks to inflation and growth, suggesting the need for sustained restrictive rates.
Global Market Dynamics Amid Economic Concerns
Chinese stocks faced pressure from worries about the country’s economic future. The Shanghai Composite Stock Index dropped over -1% to a 1.5-month low, and the yuan fell to a 14-month low against the US dollar.
The US Dec ISM manufacturing index unexpectedly rose +0.9 points to a 9-month high of 49.3, beating expectations of a decline to 48.2.
The market is currently pricing in an 11% probability of a -25 basis point rate cut during the January 28-29 FOMC meeting.
International Markets Experience Decline
Overseas markets closed lower on Friday. The Euro Stoxx 50 ended down -0.94%. China’s Shanghai Composite Index fell -1.57%, and Japan’s Nikkei Stock 225 was closed for a bank holiday.
Interest Rate Movements and Trends
March 10-year T-notes (ZNH25) closed down -5.5 ticks, with the 10-year T-note yield increasing by +3.5 basis points to 4.594%. T-note supply pressures are mounting due to $119 billion in upcoming Treasury auctions, starting with Monday’s sale of $58 billion in 3-year T-notes.
European bond yields showed mixed results. The 10-year German bund yield rose to a 1.75-month high of 2.428%, while the 10-year UK gilt yield dropped -0.2 basis points to 4.593%.
Germany’s December unemployment rate remained steady at 6.1%, beating forecasts of an increase to 6.2%.
US Stock Highlights
Megacap tech stocks provided broad market support on Friday. Tesla (TSLA) surged by more than +8%. Other major players like Amazon.com (AMZN), Alphabet (GOOGL), Microsoft (MSFT), and Meta Platforms (META) each rose by over +1%.
Chip manufacturers also rallied, contributing to market strength. ARM Holdings Plc (ARM) gained over +10%, and Nvidia (NVDA) rose by more than +4%. Other significant gainers included Advanced Micro Devices (AMD), Marvell Technology (MRVL), Applied Materials (AMAT), and ON Semiconductor (ON), each up over +3%.
Block (SQ) increased by more than +6% following an upgrade from Raymond James with a price target of $115. Chewy (CHWY) also rose over +6% after being upgraded by Wolfe Research, with a price target of $42.
In other movements, Jabil (JBL) climbed over +4% after announcing it issued a warrant for Amazon to buy over 1.16 million shares.
J.B. Hunt Transport Services (JBHT) gained over +3% due to an upgrade from Susquehanna Financial, while PulteGroup (PHM) and Carlyle Group (CG) each rose by +2% after respective upgrades.
Notable Declines Among Stocks
Conversely, US Steel (X) fell more than -6% amidst reports that President Biden would block a deal for the company to be sold to Japan’s Nippon Steel. Carvana (CVNA) dropped over -10% after Hindenburg Research indicated a short position due to the risks of its subprime loan portfolio.
Alcohol beverage stocks suffered as the US Surgeon General suggested adding cancer warnings to their labels. Stocks like Molson Coors Beverage (TAP), Brown-Forman Corp (BF.B), and Constellation Brands (STZ) each trended downward.
Adobe (ADBE) led Nasdaq 100 decliners, falling over -2% after UBS decreased its price target. Vertex Inc (VERX) also saw a -3% decline following a downgrade from Raymond James.
Upcoming Earnings Reports
Upcoming earnings reports to watch include Commercial Metals Co (CMC).
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
