The financial markets reached their peak this week as the Dow Jones Industrial Average rose to a record level, erasing all losses linked to rising interest rates, with profits climbing across a variety of stocks.
Main Facts
Since its low on October 27, the Dow Jones has risen by 15%, with 26 of the stocks listed in the index posting positive returns during this period.
The best performers in the index were Intel (up 42%), Boeing (up 40%), Salesforce (up 31%), Goldman Sachs (up 27%), and Home Depot (up 26%), according to FactSet data.
The S&P 500 increased by 15% from its bottom in late October, led during that time by Carnival (up 66%), while the best stocks in the index with a market capitalization of over $200 billion were the advanced chip manufacturers and Broadcom.
Key Developments
Notably, the rise in the shares of the tech giants that led the market surge at the beginning of 2023 was relatively moderate, as these companies rose by an average of 17%, the same increase recorded by the Nasdaq, which is heavily reliant on tech companies.
However, these companies made significant gains, as both Apple and Microsoft and Nvidia hit record high prices during this period, with Apple’s market value reaching a global record of $3.1 trillion this week.
Main Background
This fall’s stock market rebound came with a series of economic data supporting the notion of a decline in inflation to a more acceptable level, supporting a drop in interest rates from their highest level in two decades. The Federal Reserve acknowledged on Thursday that inflation is “coming down” and indicated an intention to cut interest rates three times in 2024, which boosted stocks.
The bond market also benefited on Wednesday from the unexpectedly friendly Federal Reserve, with the yield on the 10-year U.S. Treasury falling below 4% for the first time since August. Goldman Sachs economist David Mericle wrote to clients that he expects these easing financial conditions to be “sustained.”
What to Watch For
If the S&P, which is about 1% below its peak of approximately 4,800 points in 2021, can join the Dow in achieving a new high. In a note to clients last week, Bank of America analysts led by Savita Subramanian said they expect the index to reach 5,000 points by 2024, anticipating a “broader leadership” of stocks away from the big tech companies.
Leave a Reply