Falling Treasury yields tempted investors to buy technology shares on the dip, as each of the main US indices all but recovered their early year losses.
Indeed, the S&P500, which added 1.4% in the trading session, now stands just 0.7% from its record closing high. The index saw broad gains with the exception of the energy sector, which fell following weakness in the oil price due to fairly weak demand, price cuts by Saudi Arabia and a rise in output from the OPEC countries.
Having rallied strongly last year, technology stocks largely shook off a stumbling start to 2024 with gains propelled by notable buying of the “Magnificent Seven”. Nvidia was a particular highlight, rising by more than 6% after announcing three new AI chips, while Apple (NASDAQ:AAPL) recouped some of its losses from last week, adding 2.4%. The likes of Alphabet (NASDAQ:GOOGL), Amazon (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT) also saw renewed buying interest amid the ongoing debate surrounding the timing and levels of interest rate cuts, which are expected to kick in later this year should inflation finally be tamed.
The Dow also edged higher, despite a drag from Boeing (NYSE:BA) shares, which dipped by almost 7% following the recent travails on some of its MAX 9 models. The index clawed back losses from earlier in the trading day as the general lifting of sentiment spilled over to the more traditional constituents within.
The next leg of the interest rate debate will follow later in the week, with the release of the consumer price index reading on Thursday and the producer price index on Friday. Investors will be keen to see whether there is further progress towards the Fed’s 2% stated aim, or indeed whether the last mile towards hitting the target will be the hardest, as some fear. At the same time, the full-year reporting season will begin in earnest on Friday, as some of the major banks unveil their latest trends, where focus will turn towards the likes of any increase in consumer impairments, shareholder returns, the progress of dealmaking activity and the outlook for the coming quarters.
Asian markets took a positive lead from Wall Street, especially in Japan, where the Nikkei hit fresh multi-decade highs, largely following a relief rally in technology stocks. China was also marginally higher, but the economic challenges clearly remain. While there was some positive news emanating from a release on exports, which grew for the first time in several months following price discounting, demand remains tepid and mixed economic reports of late suggest that the road to recovery is still in need of stimulus from the authorities, which has so far been unconvincing. Indeed, investors who have abandoned the region show few signs of returning unless the problems within the property sector and a turnaround in consumer sentiment are forthcoming.
UK markets also began on the front foot, although the lack of pure tech in the premier index limited gains at the open, with progress more sedate. In addition, a mixed update from convenience retailer B&M European was a slight drag on the index, where comparisons will become increasingly interesting as the likes of Sainsbury, Tesco (LON:TSCO) and Marks & Spencer report their festive experiences over the coming days.
In economic news, there were some cautionary signs from a retail sales growth reading which revealed growth of just 1.7% in December, as compared to 6.9% the year previous. While the likes of travel and entertainment grew at a solid clip, with consumers flocking to book holidays for later in the year, discretionary spending generally was more cautious in the festive season. This in turn could herald a difficult few months for retailers as spending is curtailed following any Christmas excesses, at a time when UK economic growth is increasingly in need of a shot in the arm.
