S&P 500, Nasdaq hit fresh 2023 highs as Tesla rallies
The S&P 500 and Nasdaq hit fresh 2023 highs on Friday as Tesla shares jumped following a tie-up with General Motors, while investors awaited inflation data and U.S. monetary policy decision due next week.
Tesla Inc TSLA.O shares climbed 5.7% after General Motors GM.Nagreed to use the company’s Supercharger network. GM shares GM.N rose 3.8%.
The benchmark S&P 500 on Thursday ended 20% above its Oct. 12 closing low, heralding the start of a new bull market as defined by some market participants.
A rally in megacap stocks, a better-than-expected earnings season and expectations that the Fed was nearing the end of its rate-hiking cycle have supported Wall Street this year despite concerns about a looming recession and sticky inflation.
“The overall tone of the market is based on the idea that the Fed will pause its increases,” said Rick Meckler, partner at Cherry Lane Investments.
“As it pauses, the broader market will start to rally and maybe catch up with the large-cap tech stocks that have led the way up until now.”
Major growth stocks including Apple Inc AAPL.O, Microsoft Corp MSFT.O and Nvidia Corp NVDA.O rose between 0.5% and 2.6%.
Traders see a 72% chance that the U.S. central bank will hold interest rates at the current 5%-5.25% range in its June 13-14 policy meeting, according to CMEGroup’s Fedwatch tool.
Consumer prices data on Tuesday will help shape expectations around further moves by the Fed, with traders already pricing in a 50% chance of another 25-basis-point rate hike in July.
“We expect the Fed to hike one last time in this cycle in July. By September, we think weakening activity and employment data will lead toward a more enduring pause, with the Fed holding at 5.5% until its first rate cut in March 2024,” economists at BNP Paribas noted.
Signs of a resilient U.S. economy and hopes of the Fed pausing its aggressive monetary tightening have pushed volatility gauges tumbling. The CBOE Volatility index .VIX, commonly known as Wall Street’s fear gauge, sank to a fresh pre-pandemic level of 13.53 points on Thursday.
At 10:00 a.m. ET, the Dow Jones Industrial Average .DJI was up 56.85 points, or 0.17%, at 33,890.46, the S&P 500 .SPX was up 19.56 points, or 0.46%, at 4,313.49, and the Nasdaq Composite .IXIC was up 122.32 points, or 0.92%, at 13,360.85.
Target Corp TGT.N slipped 1.3% after Citi downgraded the big-box retailer to “neutral”, saying sales could fall further this year amid a challenging macro backdrop.
Adobe Inc ADBE.O added 5.4% after Wells Fargo upgraded it to “overweight”, saying the Photoshop software maker was poised to benefit from the generative AI boom.
Netflix Inc NFLX.O gained 1.7% following a report that its subscriptions jumped after the streaming giant’s crackdown on password sharing.
Declining issues outnumbered advancers by a 1.36-to-1 ratio on the NYSE, while advancing issues outnumbered decliners by a 1.00-to-1 ratio on the Nasdaq.
The S&P index recorded 11 new 52-week highs and five new lows, while the Nasdaq recorded 45 new highs and 22 new lows.
The Labor Department reported on Wednesday that U.S. job openings unexpectedly rose in April and data for the prior month was revised higher, pointing to persistent strength in the labor market.
The Job Openings and Labor Turnover Survey, or JOLTS report, also showed layoffs declined significantly last month. There were 1.8 job openings for every unemployed person in April, up from 1.7 in March, and well above the 1.0-1.2 range viewed as consistent with a jobs market that is not generating too much inflation.
After the JOLTS report, rate futures had priced in a nearly 70% chance of a rate increase next month.
“We have been suggesting that they (the Fed) stop,” said Ellis Phifer, managing director, fixed income capital markets at Raymond James in Memphis, Tennessee.