Tech Stocks Drive Wall Street Indices:
Wall Street indices received strong support at the start of the first full trading week of 2025,
thanks to the exceptional performance of leading global tech stocks.
On the other hand, the dollar reduced its losses after President-elect Donald Trump
announced that his tariff plans would not be scaled back.
While buying at lower prices boosted the gains of the most influential stocks in the S&P 500 index,
most of the benchmark’s stocks saw slight declines.
Content
Indices and Stocks Performance
Cautious Approach to Rate Cuts
NVIDIA Hits Record Levels
NVIDIA’s shares reached an all-time high ahead of CEO Jensen Huang’s anticipated speech.
Meanwhile, banking stocks rose due to optimism over potential regulatory easing
following Michael Barr’s resignation from his position as Vice Chair for Supervision at the Federal Reserve.
These developments impacted the bond market, as weaker long-term bond performance led to a yield curve inversion,
with the 30-year Treasury yield reaching its highest level since late 2023.
Short-Term Tactical Rally
Scott Rubner of Goldman Sachs highlighted signs of a short-term tactical rally in U.S. stocks,
driven by institutional money flows and the absence of selling from systematic funds following market trends.
Similarly, Andrew Tyler of J.P. Morgan Chase noted that while risks to this rally are increasing,
a sharp decline remains “highly unlikely” amid strong economic growth.
Mark Hackett of Nationwide emphasized that the recovery
observed on Friday and Monday reflects “the strength of buy-the-dip mentality.”
He added that investors continue to rely heavily on tech stocks to achieve returns.
2025 Outlook
Hackett suggested that 2025 might not deliver easy double-digit gains solely through investments in S&P 500-listed companies.
Success in this market will require greater discipline and creativity from investors.
Indices and Stocks Performance
The S&P 500 index rose by 0.6%, followed by a 1.1% increase in the Nasdaq 100 index,
while the Dow Jones Industrial Average saw little change.
American Airlines Group shares surged due to three analyst upgrades.
Citigroup shares jumped, supported by bullish bets.
Tencent Holdings ADRs declined after being added to the U.S. Chinese Military Blacklist.
Other Market Changes
The U.S. 10-year Treasury yield rose by two basis points to 4.62%.
The Bloomberg Dollar Index fell by 0.6%.
The Canadian dollar maintained gains following Prime Minister Justin Trudeau’s resignation after more than nine years in office.
Bitcoin exceeded the $100,000 mark, while oil prices halted a five-session winning streak.
Volatile Market
Lori Calvasina of RBC Capital Markets observed that investor enthusiasm
in the stock market has started to “correct itself.”
as sentiment and positioning indices retreated at the end of the year.
In a note, she stated: “While this decline does not indicate that the recent market slump has ended,
We believe it will be positive news for the stock market in the long term.”
Paul Nolte of Murphy & Sylvest Wealth Management expects 2025 to be volatile,
with large price swings presenting opportunities for buyers and sellers.
Despite the S&P 500’s December decline, investors remained net buyers across nine of the 11 sectors,
according to Chris Larkin of E*TRADE, a Morgan Stanley subsidiary.
Larkin added: “While some purchases in utilities and real estate reflect defensive strategies,
The strength in consumer discretion, led by purchases in Tesla and Amazon, shows a continued appetite for risk.”
Cautious Approach to Rate Cuts
Investors are also awaiting Friday’s jobs report, which is expected to show reduced hiring,
signaling the end of a moderate yet healthy labor market.
Nevertheless, the data is unlikely to shift Federal Reserve officials’ stance
on slowing the pace of rate cuts amid a strong economy and gradually diminishing inflation.
Lisa Cook, Federal Reserve Governor,
stated on Monday that policymakers would adopt a more cautious approach
to rate cuts due to a robust labor market and persistent inflationary pressures.
According to Morgan Stanley strategists led by Michael Wilson,
U.S. stocks have become increasingly sensitive to interest rates,
with the 10-year Treasury yield surpassing 4.5%, narrowing market movements.
In a note, they wrote: “For strong economic data to once again
lift stocks even in the face of rising interest rates,
we need more compelling evidence of improving economic activity.”
Favorable Long-Term Outlook
Despite the slowdown in rate cuts,
Solita Marcelli of UBS Global Wealth Management sees a favorable long-term market outlook.
Key drivers include lower borrowing costs, resilient U.S. economic activity,
expanding corporate earnings, increased liquidity in AI-related stocks,
and potential growth in capital market activity under Trump’s second administration.
Marcelli predicted the S&P 500 could reach 6,600 points by the end of 2025,
advising non-professional investors to take advantage of near-term
disruptions to add more U.S. stocks to their portfolios using structured strategies.
Tech Stocks Drive Wall Street Indices