The financial markets saw record highs in major indexes, such as the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite after the Federal Reserve stated its forecast for three quarter-point rate cuts in 2024. Small-cap stocks, like those in the S&P 600 index, have also turned positive for the year, indicating a positive outlook for the US economy. The participation of small-cap stocks in the market surge shows a broadening of the rally beyond just Big Tech, which is a positive sign for investors as it decreases vulnerability to pullbacks.
The market’s broadening rally is attributed to corporate earnings beats and strong economic data, renewing hopes for a soft landing scenario where the Fed can bring inflation down without triggering a recession. Fourth-quarter earnings reports from S&P 500 companies have shown positive results, with 78% beating earnings expectations. The mention of “soft landing” in earnings calls has surpassed that of “recession,” indicating a more positive outlook among companies. Additionally, the resilient labor market against high interest rates has contributed to the ongoing stock market surge.
While some tech stocks like Tesla and Apple have experienced declines, other tech giants such as Nvidia, Microsoft, Amazon, and Meta have seen double-digit percentage gains. Despite the strong rally, some investors warn of a potential 5% to 7% selloff to shake out weak hands due to the ease of the current rally. There are concerns that investors may be overly optimistic about the economy’s outlook, prompting the importance of realistic expectations among investors to prevent a market correction.
In a landmark antitrust lawsuit, the US Justice Department and several states filed a lawsuit against Apple, accusing the company of monopolizing the smartphone market. The lawsuit alleges that Apple has maintained monopoly power through violations of antitrust laws, leading to higher prices for consumers. Apple has denied the allegations and plans to fight them, stating that the lawsuit could interfere with how technology companies design their products. The lawsuit comes after years of criticism towards Apple’s app store terms, fees, and restrictions to competition.
The Swiss National Bank surprised markets by cutting interest rates, becoming the first major central bank to do so in response to post-pandemic inflation. Pressure is also mounting for the European Central Bank to cut rates for Eurozone countries as economic data suggests a slight contraction with a Purchasing Managers’ Index below 50. European manufacturers continue to face challenges from steep energy costs, exacerbated by the conflict in Ukraine. These rate cuts could precede actions by the US Federal Reserve, signaling potential shifts in global monetary policy.
