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S&P 500 Breaks 5000 Barrier, Nasdaq Surges: Tech Stocks Lead Historic Market Rally

By:JJ Kinahan

The bond market’s weakness is raising concern about inflation, but a mis of earnings and data reports are fueling a surge. And how about those Chiefs?

  • Tech is continuing to drive market rallies, and the bond market is signaling weakness amid concerns about inflation.
  • Earnings season and economic data are blending; rate cut expectations are shifting as the Fed hesitates.
  • The AFC Super Bowl win superstition has challenged market optimism. As always, long-term investment plans remain prudent.

Last week witnessed market gains, with the S&P 500 surging 0.6% on Friday, surpassing 5000 for the first time. The Nasdaq Composite also climbed 1.2%, marking a 6.5% year-to-date increase. This bullish streak, observed in 14 of the past 15 weeks, mirrors historical runs not seen since the 1970s and 1990s, as reported by the Wall Street Journal.

Technology stocks remain the focal point, driving Friday's market surge. Applied Materials (AMAT) soared 6.9%, while Nvidia (NVDA) gained 3.6%. Google parent Alphabet (GOOG)and Amazon (AMZN) both rose 2%, with Microsoft (MSFT) following suit with a 1.6% increase.

Awaiting a mix of earnings and data reports

While last week spotlighted corporate earnings, economic data took a back seat. However, the upcoming week promises a blend of both.

The consumer price index (CPI), due tomorrow, anticipates a 0.2% month-over-month and 3% year-over-year increase. Core CPI, excluding volatile food and energy prices, is expected to rise 0.3% month-over-month and 3.8% year-over-year. Later in the week, retail sales and the producer price index figures will be released.

Despite the market's optimism—driven by strong earnings forecasts and anticipated rate cuts—the bond market signals weakness. Yields on the 10-year note, climbing since December's low of 3.78%, settled at 4.19% on Friday, although slightly down in premarket trading at 4.15%.

The Federal Reserve's reluctance to cut rates in March contrasts with market expectations, which previously stood at over 80% but now linger around 16%. A reason behind this hesitation is robust economic growth, potentially accompanied by inflation. Rising oil prices, reaching $76.60 and decreasing slightly in premarket trading, remain a focal point because of their potential inflationary impact.

While the S&P 500 closed above 5000, few stocks achieved new highs, with none on the S&P 500 and only eight on the Nasdaq Composite, according to MarketWatch. However, neither index saw any new lows.

This week, aside from economic data releases, a plethora of earnings reports awaits investors. Notable names besides the aforementioned Applied Materials include Deere (DE), Coinbase (COIN) and DraftKings (DKNG) are scheduled to report. Although significant, these reports may not wield the same market-moving power as previous releases.

Image courtesy of Getty Images

The Super Bowl and the markets

The superstition regarding AFC Super Bowl wins coinciding with struggles in the market warrants cautious reconsideration. With the Chiefs winning the last two contests, the myth may be exploding.

In any case, adhering to long-term investment strategies remains prudent amid market dynamics.

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

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