S&P 500 and Dow Reach New Peaks Amid Strong Gains in Tech Shares

US Stock Market Surges to New Highs

On Tuesday, the S&P 500 advanced by 0.62%, the Dow Jones Industrial Average gained 0.99%, and the Nasdaq 100 climbed 0.94%. Futures for March E-mini S&P and Nasdaq also posted gains of 0.62% and 0.95%, respectively.

Major US stock indices rallied, with both the S&P 500 and Dow Jones reaching all-time highs, while the Nasdaq 100 hit its highest level in a week. The rally was fueled by strong performances from semiconductor and data storage companies. Mining stocks also surged as copper prices hit a record, driven by speculation that the US government may impose tariffs on refined copper, leading to increased imports and concerns about global supply shortages. In December, US copper imports reached their highest level since July.

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Strong performances in European and Asian markets also contributed to the positive momentum in US equities, as both the Euro Stoxx 50 and Japan’s Nikkei reached new highs.

However, a modest uptick in bond yields put some pressure on stocks, with the 10-year Treasury note yield rising to 4.18%. This increase was driven by higher inflation expectations, as the 10-year breakeven inflation rate reached its highest point in a month.

US economic data released Tuesday weighed on the market, as the December S&P services PMI was revised down to 52.5 from 52.9.

Federal Reserve commentary was mixed. Richmond Fed President Tom Barkin expressed a slightly hawkish outlook, anticipating that tax cuts and deregulation would boost growth, while also noting the challenges posed by rising unemployment and persistent inflation. In contrast, Fed Governor Stephen Miran suggested that current monetary policy is restrictive and predicted that significant rate cuts may be warranted this year.

Key Economic Events to Watch This Week

• Wednesday: December ADP employment change expected to rise by 48,000; ISM services index forecasted to dip to 52.3; November JOLTS job openings projected to increase by 9,000 to 7.679 million; October factory orders anticipated to fall by 1.1% month-over-month.
• Thursday: Q3 nonfarm productivity expected to grow by 4.7%; unit labor costs to rise by 0.3%; initial jobless claims forecasted to climb by 12,000 to 211,000.
• Friday: December nonfarm payrolls expected to increase by 59,000; unemployment rate to edge down to 4.5%; average hourly earnings to rise by 0.3% month-over-month and 3.6% year-over-year; October housing starts and building permits both expected to post modest gains; University of Michigan’s January consumer sentiment index projected to rise to 53.5.

Market Odds and Global Markets

Traders are currently pricing in an 18% chance of a 25 basis point rate cut at the upcoming FOMC meeting on January 27-28.

International equity markets also closed higher on Tuesday. The Euro Stoxx 50 set a new record, finishing up 0.14%. China’s Shanghai Composite reached its highest level in over a decade, climbing 1.5%, while Japan’s Nikkei 225 also hit a new high, rising 1.32%.

Interest Rate Developments

March 10-year Treasury note futures ended Tuesday down by three ticks, with the yield increasing to 4.175%. Rising inflation expectations and record highs in US equities reduced demand for safe-haven assets. Hawkish remarks from Richmond Fed President Barkin also contributed to the decline in Treasury prices. However, weaker-than-expected German inflation data provided some support for US Treasuries.

European government bond yields moved lower, with the 10-year German bund yield dropping to 2.842% and the 10-year UK gilt yield falling to 4.480%.

The Eurozone’s December composite PMI was revised down to 51.5, and German inflation figures came in below expectations, rising 0.2% month-over-month and 2.0% year-over-year. The probability of a 25 basis point rate hike by the ECB at its next meeting stands at just 1%.

Notable Stock Movers

• Semiconductors & Data Storage: Sandisk soared over 27%, leading the S&P 500, while Western Digital jumped more than 16% in the Nasdaq 100. Seagate Technology gained 14%, and Microchip Technology advanced over 11% after raising its quarterly sales outlook above consensus. Micron Technology and NXP Semiconductors each rose more than 9%, Texas Instruments climbed over 8%, and Lam Research, Applied Materials, and Analog Devices all posted gains above 4%.
• Mining: Silver prices surged over 5% and copper rose more than 1% to a new record. Hecla Mining jumped over 11%, Newmont Mining gained more than 5%, Coeur Mining and Barrick Mining each advanced over 4%, and Freeport McMoRan rose more than 2%.
• Data Center Cooling: Modine Manufacturing fell over 7%, Johnson Controls International dropped more than 6%, and Trane Technologies declined over 2% after Nvidia’s CEO announced new chip cooling technology.
• Energy: Energy producers and service companies retreated as WTI crude oil dropped more than 2%. Chevron led Dow decliners, falling over 4%, while Exxon Mobil and Halliburton each lost more than 3%. Marathon Petroleum, Phillips 66, APA Corp, and ConocoPhillips all declined over 2%.
• Other Movers: Aeva Technologies surged over 34% after its 4D LiDAR was chosen for Nvidia’s autonomous vehicle platform. OneStream jumped more than 28% on news of a potential buyout. Zeta Global Holdings climbed over 10% after announcing a partnership with OpenAI. Oculis Holdings rose more than 6% following FDA breakthrough therapy designation. Axon Enterprise gained 6% after an analyst upgrade. Vistra Corp. advanced over 4% after acquiring power plants. Versant Media Group dropped more than 10% after a sell rating. American International Group fell over 7% after announcing a CEO transition. TransUnion and Equifax declined following critical comments from the FHFA. Comcast and AT&T both fell after analyst downgrades.

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