US Major Indexes Hit New Highs, Which Stocks Are Powering the Rally?

Moomoo News Global wrote a column · May 16, 2024 21:05

On Wednesday, all three major averages closed at new records as inflation data came in lower than expected. The $Dow Jones Industrial Average (.DJI.US)$ rose 350 points, representing a gain of 0.88%, while the $S&P 500 Index (.SPX.US)$ climbed 1.17%, closing above 5,300 for the first time. The tech-heavy $Nasdaq Composite Index (.IXIC.US)$ also posted gains, ending the session 1.40% higher.

US Major Indexes Hit New Highs, Which Stocks Are Powering the Rally?

What's behind the recent uptrend?

The latest consumer price index (CPI) data released yesterday showed a lighter-than-expected increase in inflation. The April CPI rose by 0.3%, which was slightly less than expected, while inflation increased by 3.4% on a 12-month basis, in line with economists' forecasts. This is the first time this year that the data did not come in hotter than expected, increasing the prospect of a Fed rate cut later this year. The market sentiment was boosted by the data yesterday, leading to a high opening and strong gains in the US stock market, with the tech and real estate sectors, which are sensitive to interest rates, leading the way.

In fact, April witnessed the Dow's weakest month since September 2022 and the S&P and Nasdaq's worst performance since September 2023. This decline occurred due to concerns regarding the prolonged inflation and itspotential to push up interest rates beyond expectations. These concerns remained prevalent before yesterday's CPI data.

But despite a high-rate environment, investors have shown renewed optimism regarding companies' profit potential. The latest batch of quarterly earnings over the last few weeks revealed what would be the best quarterly profit growth since Q2 2022, according to FactSet. Yung-Yu Ma, chief investment officer at BMO Wealth Management said,

The market is recognizing that the inflation dynamics look favorable. Combine that with some of the takeaways from the earnings season, which were pretty healthy earnings and favorable outlooks overall, the market was just coiled to look to interpret news as good news.

BMO Capital Markets' Chief Investment Strategist, Brian Belski, raised his year-end price target for the S&P 500 to 5,600 from 5,100 in a research note on Wednesday. He noted that the momentum in the market is "likely to persist." This is currently the highest market prediction for the S&P 500 index.

It has become clear to us that we underestimated the strength of the market momentum, particularly considering that investor expectations and Fed policy guidance have become essentially aligned vs. the significant disconnect that existed at the beginning of the year.

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We've filtered out stocks from the three major indices with a market capitalization greater than $30 billion and the top three year-to-date gains (eliminating duplicates) via moomoo: $Super Micro Computer (SMCI.US)$ has seen an impressive cumulative rise of 235% within the year. Energy and power-related stocks $Vistra Energy (VST.US)$ and $Constellation Energy (CEG.US)$ have risen 152.45% and 91.42%, respectively. Semiconductor giant $NVIDIA (NVDA.US)$ has achieved a year-to-date increase of over 90%, while $Arm Holdings (ARM.US)$ has climbed over 50%, and $Amazon (AMZN.US)$ has appreciated by more than 22%.