Source: Zhitong Finance

The US stock market surged in early 2024 due to optimism about the economy and interest rate cuts, combined with a boom in artificial intelligence.

So far this year,$S&P 500 Index (.SPX.US)$It has risen more than 10%, the best first-quarter gain since 2019. On the basis of a sharp rise at the end of 2023, the benchmark index hit a record high for the first time in two years at the end of January, then hit a dozen new highs.

At the end of February, mainly technology stocks$Nasdaq Composite Index (.IXIC.US)$It also hit a record high for the first time since November 2021.

“soft landing”

The key factor for the rise in the stock market this year is that investors believe that the US economy will achieve a “soft landing,” that is, inflation will slow down, but the economy will avoid a serious recession.

According to the latest monthly survey released by Bank of America in March, nearly two-thirds of fund managers believe that the US economy is most likely to experience a soft landing within the next 12 months, while only 11% of fund managers expect the US economy to experience a hard landing.

The Federal Reserve held a dovish meeting this month. At the meeting, it maintained expectations of cutting interest rates three times this year and raised expectations for the economic outlook. This also encouraged many investors.

The rise in US Treasury yields was once a pressure point for the stock market in 2023, but this year the US stock market withstood the pressure of rising US Treasury yields. The benchmark 10-year US Treasury yield was around 4.2%, up from 3.86% at the end of last year.

A strategist at BlackRock Investment Research said this week: “As the second quarter begins, we still think the short-term risk-taking context is more favorable... We believe that as more industries adopt artificial intelligence, and recent signals from the Federal Reserve and a general decline in inflation have boosted market confidence, the optimistic risk appetite may expand beyond technology.” The agency gave US stocks an “increase in weight” rating.

Optimism helped push up stock valuations. According to LSEG Datastream data, the expected price-earnings ratio of the S&P 500 has climbed 21 times, the highest level in more than two years.

The performance of tech giants is divided

Some large stocks that led the way in 2023 continued to push the US stock market higher.

After the “Big Seven” all achieved sharp increases in 2023, their performance was divided this year.$NVIDIA (NVDA.US)$Continuing to shine, the stock price has soared more than 80% so far this year, fueled by its artificial intelligence chips.$Meta Platforms (META.US)$Another big winner this year, with shares rising 37%, and Facebook's parent company paid dividends for the first time in February.

Other large stocks didn't perform as well. Shares of iPhone manufacturer Apple (AAPL.US) fell 11% due to slowing demand for mobile phones and anti-monopoly regulatory pressure. Due to concerns about the demand for electric vehicles,$Tesla (TSLA.US)$Shares plummeted 29%.

S&P$Dow Jones Industrial Average (.DJI.US)$Data shows that as of late last week, 40% of the increase in the S&P 500 index so far this year has been contributed by the Big Seven. By contrast, these giants contributed more than 60% of the increase last year.

Multiple sectors rose

Since this year, other stocks have also helped boost the market, indicating that gains are expanding.

Technology and communication services are the top sectors in the S&P 500 index so far this year. But the energy, finance, and industrial sectors also outperformed the S&P 500 index.

Anthony Saglimbene, chief market strategist at Ameriprise, said that recent market performance shows “investors are beginning to look for opportunities outside of big tech companies and expect interest rates to fall later this year.”

Investors are also concerned about which companies will benefit from the growing popularity of artificial intelligence.

Nvidia has always been a big winner in the AI boom, but includes$Super Micro Computer (SMCI.US)$und$Arm Holdings (ARM.US)$Chip makers and other tech stocks, including them, have also seen sharp gains. chip company$Astera Labs (ALAB.US)$The stock price has more than doubled from the IPO price a week ago. This is a new sign that the artificial intelligence boom continues.

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