NEW YORK — U.S. stock markets edged to new heights as the S&P 500 inched upward following a relatively uneventful trading session on Tuesday.
The S&P 500, a key barometer of Wall Street’s performance, increased by 0.2%, finishing slightly above its previous all-time closing high achieved last month. A majority of the stocks within the index saw gains as it fluctuated around this noteworthy point throughout the day.
Meanwhile, the Dow Jones Industrial Average rose by 10 points, equating to less than 0.1%, and the Nasdaq composite climbed by 0.1%.
Entergy played a significant role in this upward movement with a notable increase of 6%. The utility company, which provides services in Arkansas, Louisiana, Mississippi, and Texas, exceeded analysts’ profit expectations for the latest quarter.
In contrast, Conagra Brands faced challenges, experiencing a decrease of 5.5% after it revised its profit forecasts for the upcoming period. The food manufacturer cited supply chain difficulties impacting two of its frozen product lines—those containing chicken and vegetables. Additionally, fluctuations in foreign currency values have negatively influenced its earnings.
Meta Platforms weighed on the market after experiencing a decline of 2.8%. This marked the first decline for the parent company of Facebook and Instagram since January 16, following an impressive 20% surge over the past few weeks.
U.S. stocks have rebounded to record levels primarily due to earnings reports that have surpassed expectations, even as significant disruptions threatened to disrupt the market’s upward momentum that began in 2022.
Amidst these developments, the potential for a tough global trade environment looms large, particularly due to President Donald Trump’s implementation of tariffs. Nonetheless, investors appear to be taking these measures in stride, believing that they are merely negotiation tools that will ultimately have a less detrimental impact on the economy and markets than initially feared.
Additionally, concerns have surfaced regarding DeepSeek, a Chinese AI startup that claims to rival major U.S. companies without the use of premium chips. This has sparked worries about a potential slowdown in AI investments, a key driver of market growth in recent years.
Contrary to these fears, major U.S. corporations have indicated intentions to continue pouring billions into AI development, regardless of disruptions caused by DeepSeek.
This optimistic outlook has led global fund managers to exhibit high confidence levels, with cash holdings in portfolios dropping to just 3.5%. This represents the lowest percentage since 2010, according to a survey from Bank of America, as stated by strategist Michael Hartnett.
Support for this bullish sentiment comes from strong earnings reports, including those from Entergy and other large U.S. firms. The S&P 500 is expected to showcase nearly 17% growth in earnings per share for the final quarter of 2024 compared to the previous year, marking the strongest growth since 2021, as per data from FactSet.
Nonetheless, the stock market faces persistent risks. Recent reports indicated an unexpected spike in inflation across the United States last month, which may pause the Federal Reserve’s interest rate reductions initiated in September to alleviate economic pressure and bolster the labor market.
Traders have begun to temper their expectations regarding potential rate cuts extending into 2025, with a significant portion foreseeing no cuts. This shift is reflected in rising Treasury yields within the bond market, which generally exert downward pressure on stock and investment prices.
On Tuesday, Treasury yields climbed further, with the yield on the 10-year Treasury bond increasing to 4.55%, up from 4.48% at the end of the previous week. Like the U.S. equity markets, bond trading was also paused on Monday for Presidents Day.
With Treasury yields stabilizing, Michael Wilson, a Morgan Stanley strategist, suggests that stocks and sectors with robust earnings momentum, such as financial firms, may perform well even if the overall market shows restraint.
In summary, the S&P 500 gained 14.95 points, closing at 6,129.58. The Dow Jones Industrial Average added 10.26 points, reaching 44,556.34, while the Nasdaq composite increased by 14.49 points, finishing at 20,041.26.
Globally, stock markets saw moderate increases across much of Europe and Asia.
Notably, stocks in Hong Kong surged by 1.6%, one of the largest gains globally, after Chinese President Xi Jinping met with entrepreneurs, including Alibaba founder Jack Ma, signaling assurance following earlier crackdowns on the tech sector.
