Early Thursday saw U.S. stock index futures showing minimal change, pointing to the S&P 500 opening just shy of its looming 5,000 milestone.
The financial markets saw gains on Wednesday, with the Dow Jones Industrial Average (DJIA) climbing by 156 points to 38,677, marking a 0.4% increase. The S&P 500 rose by 41 points to 4,995, a gain of 0.82%, while the Nasdaq Composite added 148 points, ending the day at 15,757, up by 0.95%.
Wall Street stands on the cusp of a significant breakthrough, with the S&P 500 nearing the record 5,000 mark for the first time, fueled by a wave of optimism surrounding corporate earnings — particularly from leading tech firms, such as Google-parent Alphabet, Amazon, and Meta Platforms.
This bullish sentiment is underpinned by a resilient U.S. economy and the market's adjustment to the expectation that interest rate cuts will begin later in the spring. CME Group’s FedWatch tool indicates that markets are currently pricing in an over 60% likelihood of the Federal Reserve cutting its benchmark interest rate in May, while the probability of the Fed cutting by June stands at over 95%.
Following a peak of 4,999.89 during Wednesday's trading and a record close of 4,995.06, Thursday's opening is expected to see the S&P 500 slightly lower at around 4,994, as per MarketWatch reporter Jamie Chisolm.
The market mood was further bolstered by encouraging earnings from Walt Disney announced post-Wednesday's close, although this optimism is tempered by a less favorable earnings report from PayPal.
A key driver for both the S&P 500 and the Nasdaq Composite was the 20% surge in Arm Holdings shares, after the company delivered upbeat guidance and said it saw “increasing demand for new technology driven by all things AI.”
The 22.4% rally in the S&P 500 over the last year is largely attributed to the expectation that major tech corporations, like Microsoft and Nvidia, will benefit from AI advancements.
Kathleen Brooks, research director at XTB, said in a comment to MarketWatch:
“Overall, these earnings reports are likely to cheer the market. At the start of earnings season, a spate of poor reports from U.S. banks had weighed on earnings growth, however, now that the 10 other sectors have mostly reported earnings, the picture has brightened.”
Calmer conditions in the bond markets have also helped the S&P 500's upward trajectory. The U.S. Treasury's $42 billion auction of 10-year bonds on Wednesday saw strong demand, indicating that the market is more relaxed about inflation and the anticipated timeline for the Federal Reserve's first rate cut, now expected in May.
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