S&P 500 Notches Another Record Closing High

The growth of the S&P 500 in 2023 was largely driven by the increasing investment opportunity in artificial intelligence. Nvidia's graphics processing units (GPUs) stand at the heart of this technology, assisting businesses in all areas of activity in extracting valuable insights from massive datasets through powerful algorithms. As the demand for Nvidia GPUs is skyrocketing, investors eagerly waited for the company's latest quarterly earnings data on Wednesday. The least we can say is that they were not disappointed as the new tech giant reported revenue for the fourth quarter ended January 28, 2024, of $22.1 billion, up 22% from the previous quarter and up 265% from a year ago. Nvidia’s stock (NVDA) ended the week with an 8.54% increase (up 59.16% year-to-date), uplifting not only the IT sector (+1.97% week-over-week) but also the broad-based indices, given the weight of big tech. Nvidia surpassed the $2 trillion market cap during intraday trading Friday, becoming the fifth company to reach that benchmark. The chart below clearly shows the momentum of Nvidia's stock, despite a resurgence of volatility in the days leading up to its earnings announcement, and its ripple effect on the benchmark indices.

The S&P 500 gained 1.66% for the week (+6.69% year-to-date) while the Nasdaq Composite added 1.40% (+6.56% year-to-date).

For the first time this year, all S&P sectors ended the week in the green, with performances ranging from 0.42% for energy to 2.11% for consumer staples.

Only two sectors are still showing losses since the start of the year: real estate and utilities, both are hit by the level of interest rates. In this regard, it's important to bear in mind that the yield on the US 10-year T-Bond has increased by 37 basis points to 4.25% over the period while the effective Fed funds rate is at 5.33%, well above the inflation rate.

In Europe, most equity indices followed suit with the CAC 40 eking out another record closing high at 7,966.68, up 2.56% over the week (+5.61% year-to-date), while the DAX rose 1.76% (+3.99% YTD). Yet data released earlier Friday confirmed that the German GDP fell 0.3% in the fourth quarter compared to the previous quarter.

That said, the eurozone's biggest economy could sidestep another technical recession, usually identified as two consecutive quarters of reduction, as GDP remained stagnant in the second and third quarters. Nevertheless, the Bundesbank announced that Germany is probably experiencing a recession currently, due to weak external demand, hesitant consumers, and domestic investment restrained by increased borrowing costs.

In Asia, Japan’s Nikkei 225 benchmark also hit a record high on tech strength, close to 39,100 points (up 1.59% for the week, +16.84% year-to-date), crossing the 1989 peak. Yet macro data showed Japanese manufacturing and services sector activity declined in February, but the ultra-dovish BOJ continues to fuel the stock rally.

Chinese markets resumed operations on Monday after the week-long Lunar New Year holiday. On Tuesday, the People's Bank of China cut its five-year benchmark loan prime rate (LPR) by a margin larger than expected. This move is seen as a further attempt to loosen financial conditions and aid the country's struggling property market. The Shanghai Composite jumped 4.85% bringing its year-to-date performance into positive territory (+1.01%).

Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.