The U.S. stock market is showing an unstoppable rise and setting new records every day. Although the U.S. Federal Reserve dismissed the market’s expectations of an early interest rate cut, it is approaching a new ‘milestone’ thanks to the growth of major companies.
On the 7th (local time) in the New York Stock Exchange, the Standard & Poor’s (S&P 500) index closed at 4995.06, up 40.83 points (0.82%) from the previous day, just shy of the 5,000 mark. This broke the all-time high in 3 trading days since the 2nd and is the 8th record breaking this year. On this day, the Dow industrial index also rose 0.4% (156 points), breaking an all-time high.
The S&P 500 index is considered a benchmark index representing the U.S. stock market. This is because it reflects the stock price trends of the 500 largest conglomerates. The strong performance of major U.S. companies and the artificial intelligence (AI) craze are behind the S&P 500 index’s 21.30% jump over the past year.
In fact, according to market research firm LSEG data, more than half of S&P 500 companies announced quarterly earnings, and 81.2% of them announced earnings that exceeded market expectations. In particular, the rate of increase in stock prices of technology companies is steep. On this day, major big tech companies such as Meta (3.27%), NVIDIA (2.75%), and Microsoft (2.11%) led the stock price rise. Excluding NVIDIA, which has not yet announced its performance, Meta and MS both exceeded market expectations in terms of sales and profits.
Disney, which announced its earnings after the market closed on this day, also posted net profit that exceeded Wall Street expectations for the fourth quarter of last year (October to December), and jumped 6.7% in after-hours trading, predicting that this year’s earnings per share will increase by more than 20%. As the performance of large U.S. companies shows strength, the forecast that the S&P 500 index will soon exceed the 5,000 mark for the first time in three years since April 2021 is gaining strength.
Scott Radner, Chief Investment Officer (CIO) of Horizon Investments, told the Wall Street Journal (WSJ), “It appears that individual investors are starting to buy stocks for the first time in many months,” adding that ants from around the world are flocking to the U.S. stock market amid the stock market boom. It was implied that there was. This means that the U.S. economy is making a soft landing despite the Federal Reserve’s intense tightening, and this is reflected in consumer investment sentiment.
The AI craze is also cited as the reason why the U.S. stock market is hitting record highs every day even though the Federal Reserve has not yet cut interest rates. Nvidia’s stock price, which almost monopolizes AI semiconductors, has soared 215.7% over the past year.
Nvidia is chasing Amazon in terms of market capitalization. Nvidia’s market capitalization rose to $1.715 trillion on this day, which is about 3% lower than Amazon’s value of $1.767 trillion. The last time Nvidia’s corporate value was higher than Amazon’s was 22 years ago, in 2002. At the time, they were worth less than $6 billion each. Morgan Stanley analyst Joseph Moore recently raised Nvidia’s target stock price to $750 and said, “Demand continues to rapidly increase,” leading to predictions that the company will soon surpass Amazon in terms of market capitalization.
MS, which invested in ChatGPT developer OpenAI, also jumped 55.23%. As its value has risen, MS has overtaken Apple and secured first place in market capitalization. ARM, a British semiconductor design company, also announced in its earnings announcement that day that AI is increasing sales, rising more than 19.9% in after-hours trading.
Investors also raise concerns about the fact that the market’s upward trend is concentrated only on large-cap stocks. According to Dow Jones Market Data, when the S&P 500 index exceeded the 3,000 mark in July 2019, the top five stocks accounted for 17% of the entire index. Currently, stocks of Microsoft, Apple, Alphabet, Amazon.com, and Nvidia account for 27% of the benchmark index.
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Source: Donga
Mark Jones is a world traveler and journalist for News Rebeat. With a curious mind and a love of adventure, Mark brings a unique perspective to the latest global events and provides in-depth and thought-provoking coverage of the world at large.