The S&P 500 index closed at a new all-time high on Thursday, surpassing its previous peak from early 2022, as upbeat earnings reports from major technology companies drove gains. The benchmark index rose 0.53% to end the day at 4,894.16, extending its winning streak to six straight days.
Netflix Revenue Surge Boosts Tech Stocks
The rally was led by streaming giant Netflix, which saw its stock price soar 8% after reporting strong fourth quarter results. Netflix added 7.7 million subscribers during the period, easily beating Wall Street estimates. The company also reported $32 billion in 2022 revenue, up 8% compared to the previous year.
Netflix’s blowout report provided a spark for technology stocks and lifted the overall market. Other major tech names like Tesla, Nvidia and Advanced Micro Devices (AMD) traded higher ahead of their earnings. The tech-heavy Nasdaq index jumped 1.76% to a fresh record.
“Netflix has set the tone for the rest of tech earnings season,” said Mike Wilson, chief U.S. equity strategist at Morgan Stanley. “Growth stocks across the technology and communications sectors are clearly back in favor.”
|Share Price Gain
|Advanced Micro Devices (AMD)
AI and Chipmaker Stocks See Renewed Optimism
In addition to stellar subscriber numbers from Netflix, optimism around artificial intelligence and semiconductor demand helped push stocks higher. Nvidia shares rallied after Citi analysts upgraded the stock, predicting strong growth for AI chips.
“AI is set to drive a new computing cycle, and Nvidia is poised to benefit from accelerating AI chip demand,” Citi analysts wrote. They raised their price target on the stock from $210 to $350.
Other chipmakers like AMD, Qualcomm and Micron also traded higher on the AI enthusiasm. The Philadelphia Semiconductor Index jumped 4.3% to reach an all-time high.
This optimism around AI and cloud computing has renewed bullish sentiment for tech stocks after a choppy 2023. The Nasdaq plunged 33% last year before recovering in recent months.
S&P 500’s Record Run After 2022 Bear Market
The S&P 500 first reached its previous peak of 4,893 in early January 2022 before falling into a bear market. Russia’s invasion of Ukraine and aggressive Fed rate hikes to fight inflation sparked sharp selloffs across global markets. By mid-June, the S&P 500 had plunged 24% from its high.
The Fed’s policy pivot in late 2022 helped ignite a huge rally that has now driven stocks to fresh highs. Since hitting a low in October, the S&P 500 has surged over 20%. The Dow Jones Industrial Average also closed at a record high above 38,000 this week.
Some Wall Street analysts view this as the start of a new bull market. “The S&P 500 breaking out to highs confirms we’ve kicked off a brand new everything rally,” wrote analysts at investment research firm Fundstrat. They expect the index to reach 6,000 by 2025.
But others remain skeptical about valuation levels. “While optimistic sentiment has returned, earnings estimates are still too high which makes stocks susceptible to more volatility,” UBS chief economist Paul Donovan noted.
|Previous All-Time High (4,893)
|Bear Market Low (3,666)
|Rally From Bear Market Low Begins
|Crosses Above 38,000
|New Record Close (4,894)
Global Stocks Follow Wall Street Higher
The record rally on Wall Street helped lift global stocks higher this week. Major European indexes gained between 2-3% as upbeat earnings also boosted shares overseas. The Euro Stoxx 50 rose to levels last seen in early 2022 while London’s FTSE climbed to all-time highs.
In Asia, Japan’s Nikkei finished at a fresh one-month peak as the yen held steady. Chinese stocks edged higher even as the government reported 2022 GDP growth of just 3% – one of the weakest levels in the past 40 years.
With central banks taking a less aggressive stance on interest rates, analysts expect the global equity rally to continue. Morgan Stanley equity strategists noted that “international equities still have more upside as growth improves.” However, risks around inflation, policy moves and geopolitics remain.
Stocks to Buy at Current Levels
While the S&P 500 is trading at elevated levels after its record run, many analysts see more room for gains. “The bull market is still young with legs to continue higher,” Fundstrat analysts noted. Some stocks in attractive industries that investors could consider buying at current levels:
Nvidia (NVDA) – The AI chip leader just reported record 2022 sales and earnings. With accelerating data center demand, Nvidia expects over 25% revenue growth for the new fiscal year.
Apple (AAPL) – Though it has lagged the recent rally, analysts see strong iPhone 15 sales driving earnings growth for Apple this year. The stock trades at reasonable valuations.
UnitedHealth (UNH) – The diversified healthcare giant posted double-digit EPS growth the past four quarters. UnitedHealth raised dividends over the past 14 years and still has room for margin expansion.
As the current bull market extends into 2024, investors should focus on quality companies with strong fundamentals – especially in high-growth technology areas like artificial intelligence, cloud computing and 5G connectivity. These tech disruptors are likely to drive gains for the next leg higher.
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