The three major indexes, the S&P 500, the Dow, and the Nasdaq are enjoying a continued rally as the market hopes for rate cuts.
The S&P 500, the Nasdaq, and the Dow Jones Industrial Average (DIJA) all closed higher, maintaining streaks of continuous increases. The Nasdaq hit 14,904.81 after adding 0.61%, while the Dow added 0.86 points to 37,306.02. The 0.45% increase recorded in the S&P 500, although less than the Nasdaq, is only 1.2% from 4,796.56, the index’s all-time closing high from January last year.
Nasdaq Records Largest Individual Gains, with S&P 500 and the Dow Trailing Behind
The S&P 500 has climbed more than 2.5% in the last five days and over 4% in a month. In addition, the index has logged more than 23% in year-to-date (YTD) gains, and over 24% in the past year. The top performers in the S&P 500 are American e-commerce marketplace Etsy Inc (NASDAQ: ETSY), adding 4.59%, and Costco Wholesale Corp (NASDAQ: COST), with a 3.4% increase. Tech giants Meta Platforms (NASDAQ: META) and Alphabet Inc (NASDAQ: GOOG) both rose by 2.9% and 2.5%, respectively.
Interestingly, the Dow has climbed higher than the S&P 500 in the last month with 6%, and 7.75% over three months. Its YTD return is also larger at 12.55%. However, its biggest movers saw smaller increases, with consumer goods giant Procter & Gamble Co (NYSE: PG) rising 1.54%, while Walmart Inc (NYSE: WMT) gained 1.46%.
The Nasdaq had the biggest YTD gain of the three, at 42.41% since January. In the past month, Nasdaq has climbed 4.34%, and 3.28% in 5 days. Also, the tech-heavy index had the largest individual stock gains, with rehabilitation equipment giant Jin Medical International Ltd (NASDAQ: ZJYL) rising an impressive 263.69%, while biopharmaceutical company Panbela Therapeutics Inc (NASDAQ: PBLA) rose 121% to close at $1.0100.
In the broader market, the general sentiment among investors seemed to improve after the Federal Reserve hinted at three rate cuts next year. Goldman Sachs (NYSE: GS) also expects rate cuts, forecasting March, May, and June 2024. These positive updates come as general inflation seems to be on the decline. According to US Bancorp Wealth Management Chief Equity Strategist Terry Sandven, “it’s a continuation of what we’ve seen throughout much of the month and that is, inflation seems to be coming down, and interest rates are trending lower and earnings, to this point, have stabilized. That’s a constructive backdrop for equities.”
However, Sandven believes that current earnings projections are a little too high, and may inevitably result in low forecasts next year.
S&P Forecast
On the back of the S&P 500’s surge, CFRA Research’s Chief Investment Strategist Sam Stovall has bullish predictions for the index. According to Stovall, the S&P 500 will hit its all-time high, climb another 5%, and then pull back. In the Monday note, Stovall argued with historical information, suggesting that the index could hit the ATH and then rise 5% over the next 2.4 months. Although he warns of a retracement, the CFRA Research exec states that the pullback would not result in a bear market.
Stovall’s analysis considered data from 14 bear markets since 1946. He noted that while the S&P 500 recovered all losses from the previous bear market, the rally following its expected ATH might be short. According to him, history suggests that the index will falter almost immediately after.
