The S&P 500 index hit a new all-time record high on Thursday, topping its previous peak from early January and extending the historic bull market into its third year. Propelled by strong quarterly earnings from major technology companies, the broad market index has now fully recovered losses suffered during the 2022 bear market.
Big Tech Earnings Boost Stocks
Several key earnings reports helped lift stocks and push the S&P 500 to new heights. Netflix posted strong subscriber growth after its recent struggles, adding over 7 million members globally. Chipmaker TSMC reported record profits on solid demand. Intel stock jumped 10% as new CEO Pat Gelsinger outlined plans to regain the company’s manufacturing edge.
Overall, optimism around Big Tech and semiconductor earnings lifted the tech-heavy Nasdaq index nearly 2%. The Dow Jones Industrial Average and S&P 500 gained over 1% each.
“Tech is back,” said Alan Smith, portfolio manager at Capital Investment Advisors. “Robust earnings and upbeat guidance is reminding investors of these companies’ tremendous earnings potential.”
Many analysts say bullish sentiment around Big Tech and chipmakers supported the broader market’s run to record levels.
“It’s very encouraging to see breadth in this market,” said lobal Investment Strategist Sophie Huynh. “A rising tide lifts all ships.”
| Index | % Gain | Points |
|---|---|---|
| Dow | 1.14% | over 300 points |
| S&P 500 | 1.42% | 44 points |
| Nasdaq | 1.97% | 270 points |
Fed Policy Remains Accommodative
The Federal Reserve’s latest policy announcement also boosted market sentiment by signaling continued economic support. The Fed left interest rates unchanged near zero and made no adjustments to its $120 billion per month bond-buying program.
In his press conference, Fed Chair Jerome Powell reiterated the central bank is nowhere near raising rates or tapering asset purchases. Powell wants to see “substantial further progress” in labor market recovery before adjusting policy.
His dovish tone reassured investors that easy monetary conditions underpinning the bull market will remain in place. Government stimulus checks combined with low rates and bond buying have supercharged US growth and stocks.
Bull Market Extends Record Run
With Thursday’s fresh highs, the S&P 500 has now risen over 95% from its March 2020 bottom. The bull market seems poised to keep running as the economy reopens.
Analysts say vaccine rollouts, reopenings,Trillion fiscal stimulus packages, and pent-up consumer demand could fuel above-average GDP growth in 2021.
“The US recovery still has room to run,” said Bespoke Investment Group analyst Will Compernolle. “Robust corporate earnings and rapid vaccine distribution is a perfect recipe for further market gains.”
Some strategists have set bold targets, projecting the S&P 500 could rise another 10-15% by year-end. However, risks remain from new COVID variants, inflation, and potential tax hikes.
Market breadth also shows cause for some caution – the number of S&P 500 stocks making new highs has diverged. This suggests the rally is being driven by fewer big tech stocks like Apple, Amazon, Microsoft.
Still, most analysts remains bullish overall. “We’re constructive on US equities and the economic reopening,” said Solita Marcelli, UBS Global Wealth Management.
With Big Tech leading the way, this historic bull market run may just be getting started.
Outlook Going Forward
The S&P 500 is now up over 16% in the past year. The torrid pace of gains has left some strategists cautious in the near-term, expecting a pullback after such an extended run.
Also, Treasury yields have bounced back quickly which could present headwinds for growth stocks. Rising rates typically pressure Big Tech valuations.
However, most economists remain optimistic on the US recovery and markets longer-term. Consensus forecasts call for robust GDP growth above 5% annually over the next 2 years. This is significantly above the economy’s post-2009 trend.
Such strong growth would provide a solid backdrop for corporate earnings and stocks. If vaccine distribution stays on track enabling a fuller reopening, analysts see room for markets to keep climbing the wall of worry.
Valuations also don’t appear overly demanding yet with equities trading around 22x forward earnings. This P/E ratio, while above the past decade’s average near 18x, remains well below peak bubble valuations.
As long as interest rates stay low and earnings growth remains strong, stocks may keep trending higher. Market experts will be monitoring upcoming economic data, vaccine news, inflation metrics, and interest rates closely.
So far the bulls remain clearly in charge – with Big Tech and the Fed’s backing, this record run likely still has room to roam.
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