U.S. Stock Market Sees Resilience Despite Rising Interest Rates
Despite the challenges posed by rising interest rates, the U.S. stock market has shown resilience in recent days. On Monday, technology stocks led the way, helping to recover some of the losses suffered during the holiday season.
Market Analysis
The S&P 500 added 0.6% for its second straight gain, marking a turnaround from its five straight losses that began in April. The Dow Jones Industrial Average lost an early gain to slip 25 points, or 0.1%, while the Nasdaq composite gained 1.2%. However, slightly more stocks fell in the S&P 500 than rose amid the mixed trading.
Tech Stocks Continue to Lead
Technology companies were the clear leaders on Monday, including those involved in artificial-intelligence technology. Nvidia, a leading AI company, climbed 3.4% to top its record set in November ahead of CEO Jensen Huang’s speech at the annual CES convention in Las Vegas. Despite criticism that their stock prices have already shot too high, too fast, the industry continues to talk up its potential.
Investment in AI-Enabled Data Centers
Microsoft Vice Chair Brad Smith said on late Friday that the company is on track to invest about $80 billion to build out AI-enabled data centers to train AI models this fiscal year. Smith stated that AI is the biggest opportunity "to harness new technology to invigorate the nation’s economy" since the invention of electricity. Microsoft rose 1.1% as a result.
Uber Technologies Sees Stock Price Surge
Uber Technologies drove 2.7% higher after the ride-hailing app said it would accelerate $1.5 billion in purchases of its own stock, part of a previously announced $7 billion buyback program. Uber’s chief financial officer, Prashanth Mahendra-Rajah, said that it is making the move because its stock price looks cheap compared with the strength of its business.
U.S. Steel and Nippon Steel File Lawsuit
In other news, U.S. Steel climbed 8.1% after it and Japan’s Nippon Steel filed a federal lawsuit challenging President Joe Biden’s decision to block a proposed nearly $15 billion deal for Nippon to buy its Pittsburgh-based rival. The suit alleges that the decision was a political one and violated the companies’ due process.
Real Estate Stocks Continue to Struggle
Meanwhile, real-estate stocks in the S&P 500 fell 1.4% for the biggest loss among the 11 sectors that make up the index. This is amid rising longer-term interest rates, which have struggled recently.
Market Performance
All told, the S&P 500 rose 32.91 points to 5,975.38. The Dow Jones Industrial Average slipped 25.57 to 42,706.56, and the Nasdaq composite jumped 243.30 to 19,864.98.
Upcoming Market Events
The upcoming week will have one fewer day of trading than usual, as the New York Stock Exchange and Nasdaq will close their stock and options markets on Thursday in observance of a National Day of Mourning for former President Jimmy Carter. However, the calendar is still packed with potentially market-moving events.
Job Openings and Services Industry Health
On Tuesday, updates on monthly job openings advertised by U.S. employers and on the health of businesses in the services industries will be released. On Wednesday, the Federal Reserve will release the minutes from its last policy meeting, where it cut its main interest rate for a third straight time but hinted fewer reductions may arrive in 2025.
Monthly Jobs Report
Friday will bring the week’s headliner: the monthly jobs report, along with an update on how U.S. consumers are feeling. So far, the economy has remained remarkably resilient despite high interest rates the Fed instituted in recent years to stifle inflation.
Resilience of the Economy
A report on Monday said that a measure of activity for services businesses hit its highest level in nearly three years. "Business activity in the vast services economy surged higher in the closing month of 2024 on fuller order books and rising optimism about prospects for the year ahead," stated an analyst.
Impact of Rising Interest Rates
However, rising interest rates can still have a negative impact on stock prices. At Morgan Stanley, strategist Michael Wilson says that the sweet spot for U.S. stocks is likely when the yield on the 10-year Treasury is between 4.00% and 4.50%. It drove above that level in mid-December and has remained there.
Global Market Performance
In other news, indexes were mixed across Europe and Asia. France’s CAC 40 jumped 2.2%, while Japan’s Nikkei 225 slumped 1.5%.
Conclusion
The U.S. stock market has shown resilience in recent days despite the challenges posed by rising interest rates. However, it remains to be seen how the market will perform in the coming weeks and months.
References
- Matt Ott, Zimo Zhong, and Mari Yamaguchi contributed to this report.
