MW The S&P 500 breaks 6,000 and the Dow tops 44,000. Why stocks could keep climbing.
By Isabel Wang
The S&P 500 may reach mid-6,000 in the next two months, says Tony Roth of Wilmington Trust.
The S&P 500 on Friday was trading above 6,000 for the first time in history, while the Dow Jones Industrial Average was soaring above 44,000 after Donald Trump's election and the Federal Reserve's interest-rate cut lifted the large-cap benchmark index to a fresh record.
The 6,000 mark for the S&P 500 is "a psychologically significant milestone" that could invite more investor interest in stocks, as there is still plenty of money sitting on the sidelines in money market funds and in bonds, according to Clark Geranen, chief market strategist at CalBay Investments.
"We saw the stock-market volatility VIX plummet over the past week, which has turned market jitters into market joy," Geranen told MarketWatch in a phone interview on Friday. "What we saw is a trifecta of market certainty (after the election), positive sentiment and a relatively healthy economy all contributing to the S&P 500 hitting 6,000..."
The S&P 500 SPX was rising 0.6%, to trade at 6,006.91 as of 2 p.m. Eastern time on Friday. The blue-chip Dow Jones Industrial Average was up 0.8%, to around 44,074.89, according to FactSet data.
It has been 189 trading days since the large-cap index first closed above 5,000 on Feb. 9. If the S&P 500 ends above 6,000 on Friday, it would be the shortest period for the index to reach each 1,000-point milestone since 1957, according to Dow Jones Market Data (see table below).
Shares of Vistra Corp. $(VST)$, Palantir Technologies Inc. (PLTR), Targa Resources Corp. (TRGP), Nvidia Corp. $(NVDA)$ and United Airlines Holdings Inc. $(UAL)$ have been the top five performers on the S&P 500 since Feb. 9, according to Dow Jones Market Data.
See: The bull market is 'still an infant': Why Evercore sees the S&P 500 at 6,600 by mid-2025
All three of the major stock averages are on pace for strong weekly gains on Friday, thanks in large part to the epic stock rally earlier this week as Wall Street celebrated Donald Trump's return to the White House and a potential Republican sweep in Congress. Meanwhile, the Fed's decision to cut rates by 25 basis points on Thursday, as expected, also helped keep the post-election rally alive.
The S&P 500 and the Dow Jones Industrial Average DJIA have advanced 4.8% and 4.7% so far this week, respectively, with both indexes on pace for their best week in 2024. The tech-heavy Nasdaq Composite COMP has gained 5.8% in the same period, on track for its biggest weekly percentage gain since September, according to FactSet data.
See: Wall Street believes stocks will keep rising on Trump's win - but this could threaten the rally
To be sure, even with the election and November Fed meeting behind us, uncertainty over the economic outlook under Trump's second term and volatility in the Treasury market is still keeping investors on alert for more turbulence ahead.
"Initial postelection market reactions have been picking and choosing which policy possibilities to respond to. Our experience is that such narrow reactions have not historically made for durable investment opportunities, and we favor pausing to look more closely at the likely main policy initiatives," said Paul Christopher, head of global investment strategy at Wells Fargo Investment Institute.
Earlier this week, a sharp selloff in the government-debt market on bets that Trump's victory will boost inflation and drive up deficit stoked fears that the rise in long-dated Treasury yields might soon bleed into equities.
But that concern quickly fizzled out after the Fed cut the federal funds rates to a range of 4.5% to 4.75% on Thursday. The yield on the 10-year Treasury note on Friday BX:TMUBMUSD10Y was dropping 3 basis points to 4.299%. For the week, it was falling 8.5 basis points and on pace for its largest weekly decline since early September, according to Dow Jones Market Data.
See: U.S. stocks staged an epic rally after Trump won the election. What history says could happen before year-end.
"There were a lot of questions around what are the inflationary impacts of Trump's policies, but now the market is not convinced that everything that he is going to do necessarily has to be inflationary," said Tony Roth, chief investment officer at Wilmington Trust.
Roth told MarketWatch that he wouldn't be surprised to see equities continue to rally into year-end and even into Inauguration Day in late-January.
"I think mid-6,000 for the S&P 500 in the next two months is very attainable, but then the hard work has to get done once Trump takes office as investors need figure it out how he's going to create this lower tax environment without expanding the deficit too much," Roth said via phone on Friday.
-Isabel Wang
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(END) Dow Jones Newswires
November 08, 2024 15:36 ET (20:36 GMT)
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