NEW YORK — Wall Street emerged from its holiday slump on Friday, showcasing a positive shift in market sentiment. The S&P 500 index posted a gain of 1.3%, marking its first increase since Christmas and representing its most substantial daily rise in nearly two months. The robust performance of major technology stocks played a pivotal role in breaking a five-day losing streak for the index, which was its longest stretch of losses since April, ultimately bringing its weekly decline down to 0.5%.
The Dow Jones Industrial Average gained 339 points, translating to a 0.8% increase, while the Nasdaq composite saw a significant leap of 1.8%. A significant contributor to this uptick was Nvidia, whose stock surged 4.5%. Other companies linked to the burgeoning artificial intelligence sector also enjoyed notable gains, despite some skepticism about their elevated valuations. For instance, Super Micro Computer, a company specializing in AI servers, experienced a remarkable increase of 10.9%, and Palantir Technologies saw its shares rise by 6.3%.
“Although the initial benefits of the AI boom may be fading, we believe this rally is far from finished,” remarked the chief investment officer for the Americas at UBS Global Wealth Management. Another tech giant, Tesla, saw its stock grow by 8.2%, recovering from a 6.1% decline the previous day when it reported lower-than-expected electric vehicle deliveries for the final quarter of 2024.
In contrast, Rivian’s shares soared by 24.5% after announcing that it had delivered over 14,000 vehicles in the latest quarter, surpassing analyst expectations. On the downside, U.S. Steel faced a 6.5% drop following President Biden’s decision to block a nearly $15 billion acquisition deal from Japan’s Nippon Steel for its Pittsburgh-based competitor. This news had a ripple effect on beverage companies as well, with recent statements from U.S. Surgeon General Vivek Murthy linking alcohol consumption to heightened cancer risks. This led to calls for revised health warnings and consumption guidelines. Consequently, Molson Coors Beverage fell by 3.4%, while Jack Daniel’s producer Brown-Forman experienced a loss of 2.5%.
Overall, the S&P 500 rose by 73.92 points, closing at 5,942.47, while the Dow finished at 42,732.13, up by 339.86 points, and the Nasdaq composite gained 340.88 points, closing at 19,621.68. Despite a post-Christmas dip, Wall Street’s performance has seen relatively little deterioration over the past two years, with stock indices achieving record highs amidst a steady U.S. economy resistant to the pressures of elevated interest rates associated with curbing inflation toward the Federal Reserve’s 2% target.
However, while the current economic landscape appears robust, uncertainties loom ahead. The S&P 500 had previously achieved over 50 all-time highs, buoyed by expectations that the Fed would continue to cut rates through 2025 following its easing efforts initiated in September. Lately, market expectations for forthcoming rate cuts have scaled back amid persistent inflationary pressures and concerns that the incoming administration’s trade policies could exacerbate these issues. Critics further contend that stock valuations seem disproportionately high compared to corporate profit growth.
Internationally, the potential impact of tariffs has negatively affected stock markets, particularly in China, which is already grappling with a weak property sector. The Chinese markets faced a 1.6% decline, accumulating a total loss of 5.6% for the week. Conversely, stocks in Hong Kong saw a slight recovery of 0.7%, minimizing weekly losses to 1.6%. European markets also reported declines, while South Korea’s Kospi index surged by 1.8% in response to government pledges aimed at stabilizing the economy amidst a political crisis marked by the impeachment of two presidential figures within a month.
In the bond market, Treasury yields rose after a better-than-expected report on U.S. manufacturing. Although the Institute for Supply Management reported another month of manufacturing contraction—the 25th in the last 26 months—the downturn was less severe than economists had anticipated. The manufacturing sector has been significantly affected by the high interest rates of the past few years. The 10-year Treasury yield increased to 4.59% from 4.56%, while the two-year yield, closely reflecting expectations of Fed actions, rose to 4.28% from 4.25%.
