S&P 500 closes at first record high in two years as tech fuels U.S. stocks

Stock-market investors are still “pricing in a soft landing” for the U.S. economy, said Matt Stucky, chief portfolio manager at Northwestern Mutual Wealth Management Co., in a phone interview Friday.

Investors were digesting fresh economic data that included a positive reading from the University of Michigan’s consumer-sentiment gauge for January. The preliminary reading of the sentiment survey shot up to 78.8, from 69.7 in December, to reach the highest level since July 2021.

“Better consumer confidence is a good thing for the economy,” Stucky said. “More confident consumers are more likely to spend and keep the economy pretty resilient.”

Chicago Federal Reserve President Austan Goolsbee said Friday morning that the Fed could start cutting interest rates this year “if we continue to make surprising progress on inflation.” He was speaking in an interview with CNBC.

“We don’t want to commit ourselves before the job is done,” Goolsbee said. But “as inflation comes down, that opens the door to a reduction in restrictiveness.”

See: Goolsbee says it’s too soon to determine when Fed will cut interest rates

Meanwhile, technology was the best-performing sector in the S&P 500 index on Friday afternoon, with a gain of more than 2%, according to FactSet data, at last check.

The Invesco QQQ Trust Series 1
QQQ,
an exchange-traded fund that tracks the Nasdaq-100 index, was trading above $420 on Friday afternoon, FactSet data show, at last check. That put the exchange-traded fund on track to reach a fresh record high, according to Dow Jones Market Data.

The Nasdaq-100 index was helped along by gains from semiconductor companies Nvidia Corp.
NVDA,
+4.17%
and Broadcom Inc.
AVGO,
+5.88%.

That’s after better-than-expected results from chip-making giant Taiwan Semiconductor Manufacturing Co.
TSM,
+1.04%
on Thursday helped drive a sharp gain for the tech-heavy Nasdaq Composite. Semiconductors were getting another boost on Friday after the latest sales guidance released by Super Micro Computer Inc.
SMCI,
+35.94%.

Markets entered 2024 with expectations for six or seven interest-rate cuts by the Federal Reserve this year. Those expectations have seen pushback, especially given strong economic data, such as retail-sales data, reported earlier this week.

In “a soft-landing scenario, you’re unlikely to see those six cuts come to fruition,” Stucky said, adding that Treasury yields have been “grinding higher,” reflecting a resilient economy.

The yield on the 10-year note
BX:TMUBMUSD10Y
was little changed on Friday at 4.145%, but it has climbed more than 28 basis points this year, based on 3 p.m. Eastern time levels, according to Dow Jones Market Data.

After the U.S. stock market “took a pause” this month, the S&P 500 can probably keep rising in 2024 should it reach a record closing high on Friday, Keith Lerner, co-chief investment officer at Truist Advisory Services, said in a phone interview Friday. Even as the index took a break in January, “there’s been an underlying bid for the market” and “a lack of intense selling,” he said.

U.S. companies in the S&P 500 index are largely beating analysts’ expectations so far this earnings season. Of the 52 companies in the S&P 500 that have already reported earnings for the final three months of 2023, 84.6% beat analysts’ expectations, according to data from LSEG.

In other economic data released on Friday, existing-home sales for December fell 1%.

“Right now, the economy, earnings and the credit markets continue to show resilience,” Lerner said. He said he’s overweight large-cap stocks in the U.S. and views the pullback in small-cap stocks this month as a good “entry point” for those who may have missed their rally late last year. 

“This market rally is buying into that soft landing,” he said. “If we don’t have that soft landing, we’re going to have challenges.”