Super Bull moves Swiftly to 5000
The S&P 500 rallied +1.4% last week to jump above 5000 for the first time ever closing at 5026 on Friday February 9th. This was the S&P 500’s fifth straight weeks of gains making it 14 out of 15 weeks in a row. This type of winning streak hasn’t happened since late 1971 and early 1972. This didn’t even happen during the Dot.Com trading frenzy of 1st quarter 2000. The S&P 500 is up +5% so far this year and +21% above the recent low in late October 2023.
The Federal Reserve kept its main interest rate at a 22-year high for a fourth straight meeting last week, and while officials signaled their openness to cutting them eventually, it won’t happen right away.
We are close to exiting earnings season, and so far, the results look good. With about 70% of the S&P 500 now reporting Q4 results, 80% have topped earnings expectations. That’s above the longer-run norm of around two-thirds, and even the mid-70% range when markets are strong. Earnings growth is now pegged at 9% y/y for the S&P 500. This is a revision up from 4.7% y/y at the start of the year.
Positive surprise rates are above 80% in consumer staples, energy, health care, industrials, and technology. 85% of tech companies have topped expectations so far this season. 69% in communication services have topped estimates as well. All sectors but utilities and real estate have seen upward estimate revisions since the start of the year.
Technology remains leading with +21% y/y growth, while energy, health care and materials lag with lower profits from a year ago. Negatively, estimates for the remainder of the year have been reduced, including each of Q2 through Q4. That leaves full-year 2024 profit growth estimates at just under +10% y/y, little changed from the start of the year. Be advised that the 1st quarter 2024 reporting period carries an extra 13th week for reporting which many firms have warned positively, but few analysts seem to have modeled.
Bond yields were under pressure last week, with the 10-year Treasury yield rising +15 bps to 4.17%, as most Fed officials continue to preach patience in reversing policy gears.
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