S&P 500 and Dow Jones rise to records: investors await economic recovery

The U.S. market took the fresh data on employment for December as an indicator of moderate economic recovery and a signal that economic activity will soon improve, CNBC writes . Against this background, the S&P 500 and Dow Jones reached new highs. The first full trading week of the year was marked by a synchronized rally in several markets at once - from meme stocks and high-yielding bonds to securities of small-capitalization companies, Bloomberg noted.

- The S&P 500 broad market index rose 0.65% on January 9, ending the day at a new all-time high of 6,966.3 points. During the session, the index also renewed its intraday record. For the week, the S&P 500 added more than 1%.

- The blue-chip index Dow Jones Industrial Average rose 0.5% on Friday to a record high of 49,504.07 points. For the week, the Dow added 2.3%, outperforming other indicators due to the growth of shares of industrial and construction companies, notes CNBC.

- The Nasdaq Composite Technology Index added 0.8% on January 9, closing at 23,671.35 points. The index was up 1.9% for the week, reflecting renewed investor interest in technology stocks.

- The Russell 2000 index of small-capitalization companies rose 0.8%, and its gain for the week was 4.6% - significantly more than the key benchmarks.

Growth this week was helped by signs of renewed economic momentum, a surge in productivity and favorable inflation expectations, Bloomberg explains .

The December jobs report released Friday showed a 50,000 increase in nonfarm payrolls. That's 23,000 below the Dow Jones forecast, and still suggests a moderate but recovering economy, CNBC said. The unemployment rate fell to 4.4% from expectations of 4.5%. The market took this as a signal that economic activity would soon improve, the channel said.

Not a single publication, but a whole series of macroeconomic data, which exceeded forecasts, strengthened the feeling that the situation is improving, Bloomberg writes. Strategists of Nomura Securities International named stable labor market, growth of freight rates and stable demand for cars among the growth factors.

Against this background, investors' appetite is noticeable everywhere, the agency notes. Investors are leaving "protective" bets and the technology sector, which led the market last year, to more risky segments, which usually prevail in the early stages of economic recovery. The first full week of the new year showed the rotation of capital into cyclical sectors: the consumer durables sector and materials came out in the lead, adding more than 5% and 4% for the week, respectively, CNBC calculated . The outsiders were utilities and information technology: the former fell more than 1%, while the tech sector remained virtually unchanged for the week. Growth in cyclical sectors helped the S&P 500 set several new intraday records for the week, the last of which fell on Friday, the channel said.

An exchange-traded fund focused on meme stocks jumped nearly 15%, while the value of a basket of companies with the largest short positions rose 7%, Bloomberg writes.

Additional support for the market on Friday came from stocks of developers and construction companies after President Donald Trump announced a $200 billion purchase of mortgage bonds to lower rates for homebuyers. Quotes from D.R. Horton added almost 8%, PulteGroup - more than 7%, Lennar - more than 8%. Securities of home improvement retailers, including Home Depot, also rose.

The body of employment data indicates that the U.S. labor market has "softened but remains resilient," Ameriprise Financial strategist Anthony Saglimbene explained to CNBC. He described it as "an environment of low hiring and low layoffs." "Concerns could have been raised if the data had been significantly worse than expected," the analyst added. - But the week on the employment side as a whole went by with no surprises, which I think is positive." By estimation of Saglimbene, it is necessary to expect that on results of these publications FRS hardly will hurry with rate reduction in January, and, possibly, in March.

"The extended rally is justified by stronger economic data, especially as more sectors and countries start to perform better," said Samir Samana of Wells Fargo Investment Institute. However, he added: "We are still a bit skeptical about going too far down the market capitalization scale."

Market sentiment looks overly optimistic, warns JonesTrading chief market strategist Michael O'Rourke. "Intel shares are up 10% and hitting new highs just because the company's CEO met with the president," the analyst skeptically noted, recalling also the surge in mortgage company stocks after Trump's plan to stimulate the credit market was unveiled. - Every day we see stocks rise by 10-20% because of minor news or the repetition of what the market has been discussing for months".

"Taking an overly defensive position just doesn't work right now," Julie Beal, a portfolio manager at Kayne Anderson Rudnick, told Bloomberg. - There is too much "sugar" coming into the economy.

This article was AI-translated and verified by a human editor