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Wall Street stocks hit an all-time high on Friday, with strong gains from major technology companies finally pushing the key U.S. stock benchmark to a new record after a shaky start to the year.
The S&P 500 index rose 1.2 percent to close at 4,839.81, surpassing a previous record set on January 3, 2022. Its intraday value also hit a new high of 4,842.07 during the trading session.
The S&P was within touching distance of records for a month after a rapid rally in late 2023.
However, markets have lost momentum since the turn of the year as disappointing economic data dampened optimism about how quickly the Federal Reserve will begin cutting interest rates. Even after Friday's rise, the S&P is up just 1.5 percent in January, compared with a 16 percent rally in nine straight weeks of gains starting in late October.
Several investors expected markets to remain choppy but were optimistic that there would be an upward trend in the coming months.
“If the economy continues to grow — which we expect — and inflation continues to fall, that should be pretty good for the average stock,” said Jeff Mills, chief investment strategist at Bessemer Trust.
“You may not have another 20 or 25 percent increase [in the index]but it is an environment that allows earnings to shine through and slowly pushes the market higher in what could be another solid year.”
The Nasdaq Composite, dominated by technology stocks, has also risen almost 20 percent since the end of October but would need to gain another 5 percent to surpass its record closing level.
Most of the rally since October has been driven by changing interest rate expectations as investors bet that falling inflation would allow the Fed to begin cutting rates. Lower interest rates tend to boost stocks by reducing the attractiveness of lower-risk assets like government bonds.
At the same time, investors are hoping for a recovery in corporate profits if the Federal Reserve manages to bring inflation under control without triggering a severe recession.
That bullish combination contributed to broad gains across the stock market, with smaller companies outperforming the so-called Magnificent Seven tech majors that had dominated gains at the start of 2023.
However, the final gains that took the S&P to record levels this week were once again driven by big tech companies with heavy weightings in the index, with Meta, Microsoft and Nvidia all closing at new highs on Friday. The equal-weighted version of the S&P 500 is down 1 percent so far this year.
This lack of breadth has increased expectations that the outlook could be bumpy. Ronald Temple, chief market strategist at Lazard, said: “Most people don't believe that a rally driven by seven to 10 stocks can last three years.”
Still, he added, “What still excites me about the U.S. stock market is that much of the market is still fairly valued.”