S&P 500 surpasses 5,000 mark despite economic headwinds
Initially breaching the elusive 5,000 mark in April 2021 during the throes of the pandemic, the index continued its upward trajectory despite challenges such as the conflict in Ukraine, escalating tensions in the Middle East, and surging energy prices. Throughout this period, the Federal Reserve transitioned from its accommodative monetary policy stance, with interest rates climbing to 5.25% to 5.50% and the central bank reducing the size of its balance sheet.
The recent surge in the S&P 500 can be largely attributed to the performance of key tech giants, including Apple, Microsoft, Alphabet, Amazon, Nvidia, and Meta, which collectively accounted for nearly 60% of the index's gains in the past year. However, Tesla's underperformance tempered the overall contribution of these tech behemoths.
Despite minor fluctuations in US bond yields, with the 10-year Treasury inching up to 4.16%, investor sentiment remained buoyant, buoyed by better-than-expected earnings reports, particularly within the tech sector. Notably, Ralph Lauren experienced a significant uptick in share value following impressive financial figures, while ARM's shares soared by a staggering 60% on the back of advancements in artificial intelligence.
However, not all companies fared well, as Snap witnessed a sharp decline of 35% in its share price. Furthermore, the revision lower of December's consumer price index provided a brief respite, indicating a lower-than-expected increase of 0.2%, with core inflation figures remaining stable.
Meanwhile, in Asia, Japanese shares surged to 34-year highs amidst light trading due to the Lunar New Year break in China and Hong Kong. While the Hang Seng Index initially slumped by 2%, it rebounded to close the week down 0.83% for the day but up nearly 1.4% for the week. Attention now turns to China's upcoming data releases and the possibility of stimulus measures from the central bank.
In Australia, the local market is expected to open flat following a week of mixed performances. Despite edging higher on Friday, the ASX 200 index recorded its first weekly decline in three weeks, closing at 7,642.8 points, down 0.7% for the week. Key reporting announcements from major companies such as CBA, JB Hi Fi, Wesfarmers, Origin Energy, and South32 will be closely monitored for market impact.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.