On Friday, the S&P 500 continued its upward trend, marking its 14th positive week out of the last 15. Finishing in the green once more, the index achieved a new record high, making this its 10th such milestone in 2024 alone. Yet, this particular Friday held special significance as the index surpassed and closed above the historic 5,000 mark for the very first time. Among its top 5 constituents, including Microsoft, Apple, Nvidia, Amazon, and Meta, their combined influence now dominates more of the index than any other 1,000 point interval. Last week’s surge was notably propelled by Nvidia (9.03%) and Microsoft (2.27%), with Meta also riding a significant gain of over 20% the week before.
While the 5,000 point threshold may lack technical significance, such milestones often carry psychological weight, contributing to the overall bullish sentiment in the market. However, as the index continues its ascent, concerns about potential overextension arise. Despite this, recent economic indicators have remained robust, suggesting resilience in the face of a higher interest rate environment. Consequently, expectations for early rate cuts have dwindled, with the market now pricing in a higher probability of a first cut occurring in May.
Looking ahead, risks remain as the focus shifts to upcoming US inflation data. Forecasts anticipate a decrease from 3.4% to 3% year-over-year, signalling progress towards the Federal Reserve’s 2% target. However, any unexpected rise in this figure could prompt profit-taking behaviour, potentially challenging the optimistic outlook fostered by the Federal Reserve’s monetary tightening strategy and jeopardizing hopes for a soft landing from its extensive tightening cycle.
Sources: Koyfin, Tradingview, Reuters, S&P Global
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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