(Bloomberg) — Stocks are poised for their best week's gain since November's presidential election just before Donald Trump's inauguration.
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Most groups in the S&P 500 rose, with the gauge up 1% on Friday. Nvidia Corp. led and Tesla Inc. earnings in megacaps, while Intel Corp jumped more than 9% after a report that the chipmaker was an acquisition target. Also helping sentiment were headlines that Trump and Chinese President Xi Jinping discussed trade, TikTok and fentanyl, which could set the tone for relations between the world's two largest economies. Bonds also rebounded this week, with 10-year yields down about 15 basis points in the span.
Trump, who is due to be sworn in as the 47th president of the United States on Monday, has reiterated his focus on core priorities such as cutting taxes and raising tariffs. Equities surged following the election on bets the new administration will implement pro-growth policies that will boost Corporate America. While stocks faltered last month on hawkish Fed signals, recent data showing cooling inflation reignited bets on rate cuts.
“This week's easing inflation data and a positive response to earnings from several financial firms led to a bond and stock rally,” Craig Johnson told Piper Sandler. “Recent short-term oversold conditions and a weak sense of strong sentiment underpin the major indices' recovery within their underlying gains.”
For Mark Hackett at Nationwide, the rebound in equities is encouraging, indicating that the balance between bulls and bears is leveling off.
“Markets are likely to remain in a zigzag pattern through earnings season,” he noted. “Once earnings season is over, expectations are reset, and the buyback window reopens, the bulls can re-establish control.”
The S&P 500 extended its advance for the week to 2.9%. The Nasdaq 100 climbed 1.7% on Friday. The Dow Jones Industrial Average added 0.8%. A gauge of the “Magnificent Seven” megacaps rallied 1.8%. The Russell 2000 advanced 0.4%. Buoyed by solid earnings, banks continued to surge, sending a closely watched industry gauge up 8.2% for the week. US markets will be closed on Monday for a holiday.
There was little change in the yield on 10-year Treasuries, which was 4.61%. The Bloomberg Dollar Spot Index rose 0.3%. Bitcoin jumped to around $105,000.
“What a difference a week makes,” Steve Sosnick told Interactive Brokers. “At this time last Friday stocks were selling off sharply thanks to a better-than-expected jobs report. It revealed that the equity market rather clearly favors rate cuts over a robust economy.”
From a technical perspective, Dan Wantrobski at Janney Montgomery Scott, says the setup is “almost perfect for oversold conditions to collide with positive news and trigger the rally we're currently experiencing.”
When Trump is sworn in as the next president of the United States on Monday, stock investors will have one big reason to breathe a sigh of relief. History shows that the performance of the equities benchmark over a period of three months usually improves after the inception day.
History shows the average three-month performance of the S&P 500 going into the ceremony was only about 1%, compared to a 3.7% gain on the way out, according to a Jefferies analysis of data going back to 1929.
The index “typically trades lumpy around inaugurations,” the firm's strategists said, but things are starting to pick up a few months in. Indeed, on average the S&P gains 8.3% six months into inauguration and about 9.5% 12 months into, according to Jefferies.
Trump's return to the White House is likely to protect U.S. stocks from a big selloff, according to Bank of America Corp. strategists, as investors focus on his protectionist agenda and proposals for lower corporate taxes .
US stocks are “Trump protected” from downside, strategist Michael Hartnett wrote in a note, although he doesn't expect sharp gains either because of risks including high concentration in mega-cap tech stocks, valuations and positioning investors.
“We continue to see US equities as attractive, predicting that earnings growth of 9% this year will drive the S&P 500 to 6,600 by the end of the year,” said Mark Haefele at UBS Global Wealth Management. “Large caps should outperform mid and small caps given their greater AI exposure, better earnings trends, and less reliance on Fed rate cuts.
Sector-wise, he likes information technology, finance, utilities, communications services, and consumer preferences.
“When you've had so many years of significantly outperforming US equities, it's very difficult then to look at opportunities outside the US and think they're going to be more attractive,” Zehrid Osmani told Martin Currie Investment Management. “But pricing discipline has to be an important angle for investors. We would need to see earnings momentum expand at this stage.”
Corporate Highlights:
Microsoft Corp.'s $13 billion investment. in OpenAI raises concerns that the tech giant could extend its dominance in cloud computing into the nascent artificial intelligence market, the Federal Trade Commission said in a report released Friday.
The Supreme Court unanimously upheld a law that threatens to shut down wildly popular social media platform TikTok in the US as soon as Sunday, ruling that free speech rights must give way to concerns that Chinese control of the app poses a security risk national.
US auto safety regulators are investigating General Motors Co. over concerns that more than 870,000 of its full-size pickup trucks and SUVs are at risk of engine failure.
Applied Materials Inc. and Lam Research Corp. were raised to sector overweights at KeyBanc Capital Markets as the broker repositioned mid-cap coverage toward immediate growth drivers.
JB Hunt Transport Services Inc reported. expectations based on fourth quarter earnings and warned of first quarter results, as well as cost pressures in 2025.
JetBlue Airways Corp. and Southwest Airlines Co. downgraded to underperform from neutral at Bank of America Corp., which noted that they are less exposed to corporate, premium and international routes.
Novo Nordisk A/S Wegovy's blockbuster drug was targeted for price cuts by the US government and suffered a setback in a new trial, adding to growing threats to the Danish company's early dominance in the surging market for new weight loss treatments.
The founder of Bumble Inc. Whitney Wolfe Herd is returning to the dating app company as chief executive officer, a year after she handed over the reins to a Slack Technologies Inc. executive.
Some of the main movements in markets:
Stocks
The S&P 500 rose 1% as of 4 pm New York time
The Nasdaq 100 rose 1.7%
The Dow Jones Industrial Average rose 0.8%
MSCI World Index rose 0.8%
The Bloomberg Magnificent 7 Total Return Index rose 1.8%
The Russell 2000 Index rose 0.4%
Currency
The Bloomberg Dollar Spot Index rose 0.3%
The euro fell 0.3% to $1.0275
The British pound fell 0.6% to $1.2170
The Japanese yen fell 0.6% to 156.15 per dollar
Crypto currency
Bitcoin rose 4.9% to $105,064.59
Ether rose 5.9% to $3,514.99
Bonds
There was little change in the yield on 10-year Treasuries, which was 4.61%
Germany's 10-year yield fell one basis point to 2.54%
Britain's 10-year yield fell two basis points to 4.66%
Goods
West Texas Intermediate crude fell 0.9% to $77.95 a barrel
Spot gold fell 0.5% to $2,701.21 an ounce
This story was produced with the help of Bloomberg Automation.
–With assistance from Isabelle Lee, Sujata Rao, Margaryta Kirakosian and John Viljoen.
