Stock Market Climbs to Historic Peak following a Robust Trading Period
The stock market saw a positive week, with several indices registering significant gains, despite a hawkish Federal Reserve rate cut and uncertain global political developments.
On Friday, the focus was on a phone call between U.S. President Donald Trump and China's Xi Jinping, with Trump agreeing to visit China next year. This news did little to dampen the mood in the equities market, as the S&P 500 (SP500) registered an upward swing of 0.49%, the Nasdaq Composite (COMP:IND) advanced by 0.72%, and the blue-chip Dow rallied by 0.37%.
The tech giant Apple (AAPL) led the charge, with shares advancing by 3.2% on Friday. Early indicators show stronger-than-expected demand for the iPhone 17, which became generally available to the public today.
Seeking Alpha analyst Alex King of Cestrian Capital Research stated that the equities market has been moving up, and King added that the bull market is alive and kicking, with a positive outlook into year-end.
The more rate-sensitive 2-year yield (US2Y) went up 1 basis point to 3.77%, while the benchmark 10-year yield (US10Y) moved up 2 basis points to 4.12%. However, the fixed-income market saw yields tick higher despite the Fed's decision to cut its key policy rate by 25 basis points on Wednesday. JPMorgan's Michael Feroli described Chair Powell's press conference as more hawkish, with the Fed signaling it expects to continue raising rates or keep them elevated to control inflation despite the cut.
Feroli also stated that Chair Powell's characterization of the rate cut as a risk management cut casts doubt on whether it is the start of a long easing cycle. An article discussed the possibility of interest rates plunging as we barrel toward a recession, but for now, the market remains optimistic.
Gains on the week were fueled by the Fed's interest rate cut after nearly nine months of inaction on monetary policy. However, an article talked about how Fed Funds Rate cuts won't necessarily lower residential mortgage rates, adding an element of complexity to the market's outlook.
The bearish narrative was broken down in a separate article, with analysts pointing to the strong economic fundamentals and the Fed's commitment to maintaining a stable economy as reasons for the market's resilience.
For the week, the Nasdaq, S&P 500, and Dow rose by 2.21%, 1.22%, and 1.05%, respectively. The tech sector is expected to continue leading the charge as we move into the second half of the year, with Apple's strong performance serving as a testament to this trend.
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