Tech Rally Drives Wall Street To New Highs As Key Economic Data Looms

A surge in the stock prices of major technology companies has propelled Wall Street to new all-time highs, with traders anticipating a flood of economic data and comments from Federal Reserve officials that could shape the outlook for interest rates.

The S&P 500 reached its 54th record closing of the year, advancing in a “narrow” rally dominated by a few sectors. The Nasdaq 100 rose by more than 1%, driven by gains in megacaps, with Tesla Inc. leading the charge and Apple Inc. reaching a new peak. Treasury yields fell after Federal Reserve Governor Christopher Waller indicated support for a rate cut in December, with markets pricing in more than a 70% chance of a quarter-point reduction this month.

Despite this robust rally, the S&P 500 still has room to rise, according to Andrew Tyler at JPMorgan Chase. Tyler noted that the most popular options trades suggest the index could hit 6,200 to 6,300 this month, with the S&P closing just under 6,050 on Monday.

This week, all eyes will be on Friday’s payrolls report, which is expected to show a rebound in job growth following disruptions from hurricanes and a major strike in the prior month. On Wednesday, Federal Reserve Chair Jerome Powell spoke at a moderated discussion, and investors will be keen to hear his views on the job market, inflation, and the potential for a December rate cut.

“This is the last truly important economic-data week of 2024,” said Tom Essaye of The Sevens Report. “If the data comes in ‘Goldilocks’—not too hot, not too cold—investors will expect a soft landing and a rate cut, which could fuel further gains as we close out the year.”

The S&P 500 rose 0.2% on Monday, while the Nasdaq 100 added 1.1%. The Dow Jones Industrial Average dipped 0.3%.

Treasury yields for 10-year bonds rose two basis points to 4.19%. The dollar ended a three-day losing streak, supported by a currency warning to BRICS nations from President-elect Donald Trump. In Europe, French bonds and stocks faced renewed pressure after Marine Le Pen pledged to topple Prime Minister Michel Barnier’s government over budget issues.

A year ago, market analysts braced for potential turbulence in 2024, fearing a hard landing for the U.S. economy and the prospect of delayed rate cuts. However, few predicted that the S&P 500 would deliver one of its best annual performances in history.

“We’re now in the ‘Goldilocks’ zone, where economic health supports earnings growth while remaining weak enough to justify potential Fed rate cuts,” said Mark Hackett of Nationwide. “December traditionally delivers strong performance, and other market indicators, like sentiment and momentum, remain favorable.”

Sam Stovall of CFRA highlighted that historically, December has been one of the best months for the S&P 500, with the second-highest average return since World War II. Additionally, it records the greatest frequency of gains and the lowest volatility compared to other months.

Looking ahead, Stovall and others expect the positive trend to continue, though some caution remains. “There is potential for a correction in the first half of 2025, as the market is near perfection,” said Dan Wantrobski of Janney Montgomery Scott. “We foresee a 10% to 15% pullback.”

Corporate news also made waves. Intel’s CEO Pat Gelsinger was ousted after the board lost confidence in his turnaround plans. Super Micro Computer, after an independent review, cleared itself of misconduct allegations but recommended leadership changes. Meanwhile, MicroStrategy used proceeds from the sale of 3.7 million shares to buy $1.5 billion in Bitcoin.

Volkswagen workers in Germany staged temporary walkouts, and Stellantis’ CEO Carlos Tavares unexpectedly departed, creating leadership uncertainty in the auto sector.

Key events to watch this week include speeches by Fed officials, economic reports on U.S. factory orders, jobless claims, and consumer sentiment, as well as Eurozone GDP data.