(Reuters) – U.S. stock index futures edged higher in the last trading session of 2024, continuing its bull run of more than two years ago on signs of post-pandemic economic resilience, hopes of lower borrowing costs and AI boost.
The S&P 500, Dow and Nasdaq are all near record highs and on track to finish higher for a second straight year.
A nearly 100 basis point cut in interest rates in 2024 by the Federal Reserve and a rally in tech stocks in anticipation of a boost to corporate profits from artificial intelligence led a strong surge in equities in 2024.
The S&P 500's technology, communications and consumer discretionary services have jumped more than 30% this year.
Although this year's AI poster-child Nvidia's surge is down almost 170% compared to last year, the rally helped the company gain $3 trillion in market value, while Tesla regained the $1 trillion level.
At 05:45 am ET, Dow E-minis were up 90 points, or 0.21%, S&P 500 E-minis were up 17 points, or 0.29% and Nasdaq 100 E-minis were up 75.25 points, or 0.36% .
Nvidia was up 0.7%, while the Elon Musk-led automaker added 1.6% in premarket trading. Movements are expected to be influenced by thin numbers ahead of the New Year holiday on Wednesday.
“It's also normal to start thinking that the AI rally will fizzle out one day … but still, everyone who called for a correction so far has turned out to be wrong, and Wall Street analysts spent the year raising their price targets.” said Ipek Ozkardeskaya, senior analyst, Swissquote Bank.
Towards the end of the year, risk-taking improved as Donald Trump's presidential victory boosted bets that he would fulfill his promises to ease regulations, cut taxes and raise tariffs to help domestic businesses.
His win also powered small cap stocks. The Russell 2000 hit a record high, setting it up for a gain of about 10% – its second annual gain in a row. Banks have also benefited and increased by more than 30% this year.
However, equities hit a rough patch in December, putting the S&P 500 on track for its biggest monthly decline since April, due to higher yields on Treasury notes at a time when equity valuations are under pressure and the Fed carefully.
The yield on the benchmark 10-year note has come off a seven-month high and is at 4.5%, as markets see Trump's inflationary plans, potentially slowing the pace of Fed rate cuts.
Traders expect the central bank to deliver its first rate cut of 2025 in either March or May, according to CME Group's FedWatch Tool.
Trump's victory has also been a tailwind for crypto stocks as bitcoin prices touched $100,000.