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Market Reaches Record Highs as a Tech Surge Propels S&P 500 Near 5000

By:JJ Kinahan

Strong earnings reports are generating optimism despite potential headwinds

  • The market is reaching new highs fueled by tech. Meanwhile, earnings reports are generating optimism despite potential economic headwinds.
  • Rising bond yields are challenging rate cut expectations, and optimism among CEOs contrasts with market trends.
  • It may be time for a breather—it’s prudent to adhere to long-term investment plans amid uncertainties.

The S&P 500 surged to a new high, flirting with 5000 before a modest 0.1% uptick yesterday. Similarly, the Nasdaq Composite, propelled by tech stocks, has neared its 2021 peak, just 1.6% shy. Forecasts for robust 2024 earnings are bolster this ascent.

Fourth-quarter earnings are poised for a 2.8% increase, up from previous estimates. Analysts project 11% growth for 2024, propelling S&P 500's forward-looking earnings to 20.38 times, above its decade average. Notably, ARM Holdings saw a remarkable 48% surge on stellar earnings and outlook. Disney (DIS) had an 11.5% gain that underscores market optimism.

But despite upbeat earnings, PepsiCo (PEP) faces a revenue dip, signaling consumer spending restraint. Alphabet (GOOG) is rebranding Google AI products as Gemini and launching a competitive subscription service.

CEOs are expressing economic optimism because they anticipate falling inflation and potential cuts in interest rates. However, bond market trends are offering a contrast, with yields rising as rate-cut expectations dwindle.

Stocks face potential headwinds from rising credit card debt and oil prices amid Middle East tensions. Bitcoin is gaining traction amids stock market highs, reflecting valuation uncertainties.

Expectations for a market pullback are growing as equities have soared nearly 5% in 2024. That means long-term investing remains prudent in the face of potential market corrections.

JJ Kinahan is CEO of IG North America—which includes tastylive, tastytrade and IG's FX Business. Kinahan traded for 21 years at the Chicago Board Options Exchange. He serves on the CBOE Advisory Board and the SIFMA Options Committee. @thejjkinahan 

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