Stay informed with free updates
Just sign up for US stocks myFT Digest — delivered straight to your inbox.
Wall Street stocks hit a record high on Friday, with strong gains in big technology companies finally pushing the index to a new record after a shaky start to the year.
The S&P 500 index, the main benchmark for U.S. stocks, rose 0.9% on the day to 4,824.19, surpassing its previous intraday high set on January 4, 2022.
After a strong rally at the end of 2023, the index was within reach of a record for a month.
But markets have lost momentum since the start of the year as disappointing economic data dampened optimism about how quickly the Federal Reserve would start cutting interest rates. Even after Friday's gains, the S&P was up just 1% in January, compared with a nine-week gain of 16% starting in late October.
Investors said they expected the market to remain volatile but were optimistic about an upward trend in the coming months.
“If economic growth continues and inflation continues to trend down, that's going to be pretty good for average stock prices,” said Jeff Mills, chief investment strategist at Bessemer Trust.
“We won’t see another 20 to 25 percent increase. [in the index]But it's an environment that can allow earnings to shine and slowly push the market up in what could be another solid year. ”
The tech-heavy Nasdaq Composite Index has also risen nearly 20% since late October, but needs to rise another 5% to surpass its closing record level.
Much of the rise since October has been driven by shifts in interest rate expectations, as investors bet that falling inflation would allow the Fed to start cutting rates. Lower interest rates tend to make low-risk assets such as government bonds less attractive and push up stock prices.
At the same time, investors are hopeful that the U.S. central bank will succeed in reining in inflation without causing a deep recession, and that corporate profits will begin to recover.
This optimistic combination fueled a strong rally in the overall stock market, with smaller companies outperforming the so-called Magnificent Seven tech group that dominated the rally in early 2023.
But the final gains that pushed the S&P to record highs this week came from big tech groups, which once again weigh heavily in the index. The equal-weighted version of the S&P 500 is down 2% year-to-date.
This lack of breadth has raised expectations that the outlook may be unstable. “Most people don't think this 7-10 stock rally will last three years,” said Ronald Temple, chief market strategist at Lazard.
Still, he added, “What's still exciting about the U.S. stock market is that much of it remains affordable.”