S&P 500 gains slightly after hitting year-end high

S&P 500 gains slightly after hitting year’s high closing, pushing Wall Street into bull market territory, a welcome sign for 401,000 savers

  • Wall Street’s major indices opened mixed on Friday after the start of a new bull market
  • The S&P 500 closed 20% higher on Thursday from its recent October lows
  • The market is responding to expectations that the Fed is nearing the end of rate hikes

Wall Street’s major stock indices opened mixed on Friday, a day after the S&P 500 tipped into bull territory, marking the end of a bear market cycle.

The S&P 500 gained 0.2 percent shortly after the opening bell, while the Nasdaq Composite advanced 0.5 percent and the Dow Jones Industrial Average fell 30 points, or 0.1 percent.

The benchmark S&P 500 ended Thursday 20 percent above its Oct. 12 low, marking the beginning of a new bull market as defined by some market participants.

The Nasdaq and S&P 500 have hit new highs for the year in recent sessions, boosted by an AI-driven rally in tech megacaps, a better-than-expected earnings season and expectations that the Fed is nearing the end of its inflation-fighting hikes.

“We’ve had a pretty strong uptick so far this year and you’re getting some profit taking. But the overall tone of the market is based on the idea that the Fed will pause its hikes,” said Rick Meckler, a partner at Cherry Lane Investments.

The benchmark S&P 500 closed Thursday at 4,293.93, a 20 percent gain from its recent low in mid-October

“If it pauses, the broader market will start to rise and perhaps catch up with the large-cap technology stocks that have led the way so far,” he added.

According to CMEGroup’s Fedwatch tool, traders see a 72 percent chance that the US Federal Reserve will hold interest rates at the current range of 5-5.25 percent at its policy meeting next week.

New inflation data to be released on Tuesday will help shape expectations around further moves from the Fed, with traders already pricing in a 50 percent chance of another 25 basis point rate hike in July.

We expect the Fed to raise one last time in this cycle in July. By September, we think weakening activity and employment data will lead to a more sustainable pause, with the Fed sticking at 5.5 percent until the first rate cut in March 2024,” economists at BNP Paribas noted.

Signs of a resilient US economy and hopes that the Fed will pause its aggressive monetary tightening have sent volatility gauges tumbling.

The CBOE Volatility Index, commonly known as Wall Street’s fear gauge, fell to a new post-pandemic low of 13.53 on Thursday.

Traders see a 72 percent chance that the US central bank will hold interest rates at the current range of 5-5.25 percent at its policy meeting next week (file photo)

With the S&P 500 rising 20 percent above its October lows, Wall Street’s leading health metric has climbed out of a painful bear market that fell 25.4 percent in about nine months.

However, the arrival of a bull market does not mean that the stock market has reached its old heights.

A 25 percent drop for the S&P 500 requires a 33 percent rally to get back on track.

Declaring the end of a bear market may seem arbitrary, and different market watchers use different definitions, but it provides a useful marker for investors.

It’s also a reminder that investors who can hold their own during a recession almost always recoup all of their losses in S&P 500 index funds.