S&P 500 Hits Record Highs Amid Economic Optimism and AI Bets

Summary

  • The S&P 500 continues its strong rally scoring new record highs thanks to optimism about the economy and lower interest rates, and bets on artificial intelligence.
  • Tesla’s stock value suffers a slump to its lowest point since May 2023, putting it below Eli Lilly and Broadcom.
  • The U.S. economy exhibits stronger-than-expected growth in Q4, defying recession predictions and supporting corporate earnings optimism.
  • Jobless claims, however, see a slight increase and some health insurers project disappointing annual profits.
  • Next week’s quarterly results from tech giants such as Apple, Microsoft, Amazon, Alphabet, and Meta Platforms will offer insights into their high valuations.

Market Moves and Tech Giants

The S&P 500’s strong performance is buoyed by hope for the economy as well as reduced interest rates and the potential of artificial intelligence. The index recently achieved new record highs and continues to climb.

Trading prospects for some high-profile tech companies will be clearer next week when Apple, Microsoft, Amazon, Alphabet, and Meta Platforms release their quarterly reports. Investors are eager to see if these tech behemoths’ high valuations are justified by their recent stock surges since the Wall Street recovery in 2022.

Tesla’s Struggles

Meanwhile, Tesla faces a market challenge. The company’s margins have been impacted by sales declines and price cuts, leading to a decline in stock value. It plummeted to its lowest level since May 2023, bringing its market valuation to around $573 billion. This slip positioned the company under both Eli Lilly and Broadcom.

U.S. Economy and Job Market

The U.S. economy’s growth rate in Q4 surprised many, driven by robust consumer spending and outpacing predictions of a potential recession. The Federal Reserve’s aggressive interest rate hikes did not prevent a full-year growth of 2.5%. Concurrently, initial jobless claims for the week ended Jan. 20 saw an increase to 214,000, exceeding the estimated 200,000 figure.

Health Insurers and Airline Sector

In other financial news, health insurer Humana’s shares plunged after it projected disappointing annual profits, consequently dragging the S&P 500 healthcare sector index down 0.8%. UnitedHealth and Cigna also noted a drop in their shares.

On a positive note, airline carrier American Airlines saw a rise in shares due to its promising annual profit forecast.

Corporate Earnings

Turning to corporate earnings, IBM surprised investors by forecasting full-year revenue growth above estimates. Media giant Comcast also saw a 4.3% increase following the release of its quarterly revenue estimates.

According to LSEG data, 82% of the S&P 500 companies that have reported their earnings so far exceeded expectations. This beat rate is significantly higher than the long-term average of 67%.

These market changes and financial results will inevitably impact forex or trading. Particularly assets linked to these sections of the market could see significant volatility.

PIP Penguin
Logo