In a surprising turn of events, tech companies, spearheaded by Apple, managed to ignite the stock market on Thursday. After facing significant losses earlier in the trading session, the Dow Jones Industrial Average made an impressive comeback, adding 201.94 points or 0.54%, to finish at 37,468.61. Meanwhile, the tech-heavy Nasdaq Composite surged by 1.35% to close at 15,055.65, and the S&P 500 climbed 0.88%, now sitting just a mere 15.62 points, or 0.33%, away from its closing record at 4,780.94. Notably, the Nasdaq and the S&P 500 have already achieved positive gains in 2024, with increases of 0.30% and 0.23%, respectively. On the flip side, the Dow remains in negative territory, down 0.59%.
One of the primary drivers of this tech-filled rally was none other than Apple. Following Bank of America’s decision to upgrade the stock to buy, Apple’s shares surged by approximately 3.3%. The bank’s upgrade included a bullish outlook, projecting over 20% upside potential for the company within the next 12 months. This remarkable surge marked Apple’s best day in the market since May 5, 2023, showcasing its undeniable strength. Additionally, the Technology Select Sector SPDR Fund (XLK) experienced a notable boost of approximately 2%, reaching an all-time high.
Taiwan Semiconductor Manufacturing Co, the world’s largest chipmaker, also played a crucial role in supporting the tech-driven rally. The company announced an impressive earnings and revenue beat for the fourth quarter, causing its stock to jump by 9.8%. As a result, the VanEck Semiconductor ETF (SMH) soared by more than 3%, also reaching a new all-time high. The positive performance of Taiwan Semiconductor Manufacturing Co acted as a catalyst for other companies in the semiconductor industry, further strengthening the overall tech sector.
Experts have attributed the tech sector’s recent success to the positive outlook for artificial intelligence (AI) and semiconductors. Ross Mayfield, an investment strategy analyst at Baird, emphasized the role of Taiwan Semiconductor Manufacturing Co’s positive update in bolstering tech stocks. Mayfield stated, “Tech shares have ‘gotten a boost today from the TSMC update, which had a lot of positivity on forward guidance for semiconductors and AI, to the extent that’s what most of these companies are trading on. You can see the price action move to that.” Furthermore, he highlighted the potential impact of the evolving macro environment, predicting that companies with a stronger focus on AI would benefit the most.
As the market continues to flourish, investors are wary of potential consequences. The recent jobs data, indicating a persistent tight labor market, prompted the 10-year Treasury yield to climb to 4.14%. This increase in yields, coupled with Wednesday’s strong retail sales report for December, has sparked concerns about fewer rate cuts from the Federal Reserve than previously anticipated. Currently, the market is pricing in a 56% chance of a quarter percentage point rate cut in March, according to the CME FedWatch Tool. However, Jay Hatfield, CEO at Infrastructure Capital Management, highlighted the market’s excessive reliance on rate cuts in the past year and the growing sentiment that tech companies are a safer investment in times of rising rates.
Raphael Bostic, President of the Atlanta Fed, surprised investors by suggesting that the central bank could begin reducing rates as early as the third quarter. While this is sooner than initially expected, it indicates a more gradual pace of rate cuts than the market anticipates. This divergence in expectations may lead to potential market adjustments. Only time will tell if the tech sector will maintain its robust performance, or if other market factors will come into play.
The power of tech companies, especially Apple, served as a driving force behind the market’s positive performance. The surge in tech stocks, supported by optimistic projections for AI and semiconductors, instilled a renewed sense of confidence among investors. However, concerns regarding monetary policy and potential adjustments continue to loom over the market. As we journey further into the year, it remains essential for investors to closely monitor the behavior of tech companies and their influence on the broader market landscape.
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