US indices continued their rally on Friday

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Key points:

  • The S&P 500 reached a new all-time high.
  • The growth was supported by strong quarterly company reports and the January US unemployment report.
  • 80% of S&P 500 companies beat Wall Street expectations, with shares of Meta Platforms up 20.3% after paying its first dividend.

Friday saw a significant surge in US stock indices, with the S&P 500 index hitting a new record closing high. Robust earnings and positive findings in the January unemployment report fueled confidence in the US economy, contributing to these remarkable results. Conversely, this has diminished the probability of the Federal Reserve lowering interest rates in the immediate upcoming period.

Companies’ quarterly reports exceeded traders’ expectations

The S&P 500 and Nasdaq experienced a notable uptick, propelled by robust quarterly performances from Meta Platforms and Amazon.com, both contributing to gains of over 1%. In contrast, Dow Jones results were comparatively subdued. All three major US stock indices secured their fourth consecutive weekly increase.

The ongoing fourth-quarter earnings season involves 230 S&P 500 companies reporting, with an impressive 80% surpassing Wall Street expectations, as reported by LSEG.

Analysts anticipate a noteworthy improvement in S&P 500 earnings, projecting a 7.8% annualized growth rate for the October-December period, a significant leap from the 4.7% estimate at the start of January.

Meta Platforms observed a remarkable surge, with shares climbing 20.3% to reach a record high, following the issuance of its first dividend ahead of Facebook’s 20th anniversary.

Amazon.com witnessed a 7.9% increase in shares after reporting a surge in fourth-quarter revenue. The growth was attributed to new generative artificial intelligence features in cloud services and e-commerce, driving strong performance during the late 2023 holiday season.

What the unemployment report showed

The most recent nonfarm payroll figures reveal that the United States added 353,000 jobs in January, surpassing the predictions of analysts. Additionally, the Labor Department reported an unexpected acceleration in wage growth.

These indicators of economic expansion have increased the likelihood that the US central bank will postpone its anticipated key rate cut, pushing it further into the future than many had initially anticipated. Federal Reserve Chairman Jerome Powell expressed opposition to the idea of implementing rate cuts in March during Wednesday’s announcement.

According to data from FedWatch CME, financial markets now estimate a 20.5% likelihood of a 25 basis point rate cut at the Fed’s March meeting. This marks a significant decrease from the 69.6% probability recorded a month earlier.

“Looking ahead to the next few days, investors are focused on upcoming financial and economic reports to identify more consistency in the data and assess the scope and timing of the Fed’s rate cuts.”

– commented Greg Bassuk, Chief Executive Officer of AXS Investments.


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