On Thursday, major US stock indexes maintained firm, with the S&P 500 (^GSPC) and Dow Jones Industrial Average (^DJI) narrowly touching record highs. Investors welcomed Disney’s (DIS) positive earnings report and reviewed other company results.
The S&P 500 rose 0.06% to settle at 4,997.91, a new record high. The benchmark index came close to reaching 5,000 once more. The Dow Jones Industrial Average climbed 0.13% to a new record high of 38,726. Meanwhile, the tech-heavy Nasdaq (^IXIC) climbed almost 0.2%.
On Thursday, the small-cap Russell 2000 Index (^RUT) outperformed, climbing about 1.5% after being a laggard during this year’s market rise, which has continued many of the themes that predominated in 2023.
Stocks have soared as strong economic data and earnings have raised Wall Street spirits, allowing the benchmark S&P 500 to approach the critical psychological threshold of 5,000. However, other investors are sceptical that gains can be sustained, given the concentrated group of megacaps driving them.
Arm (ARM) shares rose more than 47% on a solid sales forecast, raising hopes that AI and technology will continue to bolster the industry. The chipmaker issued an unexpectedly optimistic outlook based on its development into new markets. Disney (DIS) shares jumped more than 11% as investors cheered its earnings beat and partnerships with Taylor Swift and Fortnite creator Epic Games.
The S&P 500 (^GSPC) is approaching 5,000 for the first time ever. Once again, the stocks that are driving the index are the largest members of the benchmark average.
In 2023, the “Magnificent Seven” stocks led the majority of the gains. However, with Apple (AAPL), Alphabet (GOOGL, GOOG), and Tesla (TSLA) trading more volatile early in the year, 2024 has been essentially a market of four companies.
According to Yahoo Finance’s Jared Blikre, Amazon (AMZN), Meta (META), Microsoft (MSFT), and Nvidia (NVDA) have all returned roughly 20% so far this year. The profits from these four stocks alone account for about 69% of the S&P 500’s gain this year.
Zooming out, the S&P 500’s market capitalization weighting might be interpreted differently.
According to Goldman Sachs equities analyst Ben Snider, the outsized gains from these businesses have been a net positive for index investors, who have profited from the top tech names driving the main average higher.
Snider went on to say that, while the extent to which these few stocks are pushing the major index upward is now unusually high, the idea that a few stocks lead S&P 500 advances is not a new one. In reality, Snider contends that it has been a feature, not a flaw, of the benchmark index.
“That’s part of why the S&P 500 or the US equity market broadly has been so strong over the years, which is the new companies grow and they become larger weights in the index, and they drag the market higher with them,” stated the research firm. “Eventually, disruptors will arise, as will new technology and enterprises. And when those grow in size, it will be their turn to drive the market upward.”
Mortgage rates are likely to fall this year, increasing home demand and perhaps driving up housing stock prices.
In a note, Bespoke Investment analyst Jake Gordon stated that housing-related equities, such as the homebuilders trade, in “sync with mortgage rates, suggesting lower rates would be bullish for those stocks.”
He bases his conclusion on comparing the performance of the iShares US Home Construction ETF (ITB) over the last year to the inverted national average for a 30-year fixed mortgage.
Tesla (TSLA) has stated that it will resume operations at Giga Berlin after a production suspension because to continuous Houthi militia attacks on component suppliers utilising Red Sea delivery routes.
According to the German newspaper Oldenburger Onlinezeitung (via Electrek), Giga Berlin plant manager André Thierig said that manufacturing would restart on February 12 following a stoppage that began in late January.
Thierig went on to say that “the supply chains are intact again,” adding that Tesla now has “the necessary security that all necessary production parts are available in sufficient quantities to be able to fully restart.”
Last month, Tesla announced that supplier components from Asia will have to change routes from the Red Sea and Suez Canal to near the Cape of Good Hope in South Africa, resulting in lengthier lead times and gaps in supply chains.
Tesla’s Giga Berlin factory produces the Model Y SUV exclusively for Europe and other chosen regions. Though the facility isn’t as prolific as Tesla’s operations in Shanghai and Fremont, Calif., it did make 5,000 Model Ys in a week in May of last year, and Thierig stated that Giga Berlin produced 6,000 units per week before closing. “Yes, we have broken this milestone,” Thierig told Oldenburger Onlinezeitung.
Thierig stated that the short production halt will not prevent Tesla from returning to 6,000 units per week once the facility resumes operations. According to Tesla, Giga Berlin has an installed yearly capacity of 375,000 automobiles, while Giga Shanghai has over 950,000 units.
A two- to three-week downtime would affect around 10,000-15,000 Model Y vehicles, which isn’t too surprising given that Tesla manufactured 1.846 million vehicles globally last year.