US stock market delivered their strongest performance since the November presidential election, capping off a robust week as investors looked ahead to Donald Trump’s inauguration as the 47th US president. The S&P 500 rose 1% on Friday, with most sectors posting gains.
Key Drivers of the Rally
- Tech Leadership: Nvidia Corp. and Tesla Inc. led the charge among the largest companies.
- Intel’s Jump: Intel Corp. saw a sharp 9.2% surge following reports of a potential acquisition.
- Geopolitical Signals: Investor sentiment was bolstered by reports of discussion between Trump and Chinese President Xi Jinping shift in US-China relations.
Broader Market Trends
Bond prices also rebounded, with 10-year Treasury yields dropping 15 basis points over the week. Optimism surrounding Trump’s, proposed tax cuts and tariffs reignited investor enthusiasm for pro-business policies, offsetting concerns about last month’s hawkish Federal Reserve signals.
While equities took a hit last month due to hawkish signals from the Federal Reserve, recent data showing easing inflation has reignited hopes for rate cuts.
Strategist Insights
- Craig Johnson (Piper Sandler): Johnson attributed the rally to easing inflation data, strong financial earnings, and oversold conditions. “This has lifted major indices from their primary uptrends,” he noted.
- Mark Hackett (Nationwide): Hackett described the rebound as encouraging. “Markets are likely to zigzag during earnings season. Once expectations reset and buybacks resume, bulls could regain control,” he added.
Weekly Market Performance
For the week:
- S&P 500 gained 2.9%
- Nasdaq 100 climbed 1.7% on Friday alone
- Dow Jones Industrial Average rose 0.8%
Friday’s Closing Levels
| Index | Close | Change | %Change |
|---|---|---|---|
| Dow Jones | 43,487.83 | +334.70 | +0.78% |
| S&P 500 | 5,996.66 | +59.32 | +1.00% |
| Nasdaq | 19,630.20 | +291.91 | +1.51% |
| US 10-Year Yield | 4.627% | — | — |
| VIX | 15.97 | -0.63 | -3.80% |
Looking Ahead: Mixed Sentiment Amid Earnings Season
Markets will be closed on Monday for a holiday, but investors are cautiously optimistic as earning season unfolds. So far, major banks have delivered positive results, lifting sentiment. However, attention now shifts to mega-cap tech companies, which will need to demonstrate strength to sustain the rally.
Cautious Optimism
The market’s bullish sentiment is underpinned by expectations for market-friendly policies from the incoming administration. However, investors remain wary of potential missteps, as unpredictable policy announcements could trigger a reversal. Breaking key support levels could create significant downside risks.
Prepare for Market Volatility
With the market aiming for new highs, volatility is likely as earnings reports roll in. Bulls remain in control for now, but traders should remain prepared for sudden swings as macroeconomic and political developments unfold.
Source: CBOE, Bloomberg
This commentary was written by James Gomes, a seasoned finance professional with over 30 years of industry experience, including a tenure exceeding 20 years at a prominent US bank.
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