The U.S. stock market sees an upswing, buoyed by favorable economic indicators and investor sentiment. As of Friday morning, the S&P 500 rose by 1.89% for the week, indicating robust performance in anticipation of the day's trading. The Dow Jones Industrial Average also showed significant movement, trading 316 points higher, marking a 0.7% increase. This rally occurs amidst decreasing expectations for inflation and interest rates, with the core consumer price index and the producer price index registering smaller-than-expected increases for December.
These developments come as borrowing costs, which had been in decline into December, started to rise after the Federal Reserve began cutting its benchmark rate. However, the 10-year Treasury yield has recently pulled back sharply, fueling hopes for multiple rate cuts throughout the year. This dynamic shift in borrowing costs has influenced market movements, with U.S. stocks opening Friday's trading session in the green.
In contrast, futures trading saw a slight dip, with stock futures ticking lower on Thursday evening. Notably, the Nasdaq 100 shed 0.2% in futures trading. Despite this, other sectors show promising developments.
In the housing market, starts surged at a faster-than-anticipated pace in December, despite climbing mortgage rates. The 30-year mortgage rate recently edged above 7% for the first time since May 2024. This rise in housing starts reflects underlying strength in the sector amidst challenging conditions.
The global economic outlook also shows signs of improvement. The International Monetary Fund (IMF) raised its growth projections for the U.S. economy to 2.7%, up by 0.5% from its previous forecast in October. This revision is attributed to strong labor market trends and accelerating investment. Meanwhile, global growth is projected at 3.3% for both 2025 and 2026 according to the IMF's World Economic Outlook released Friday.
"We think LRCX's more focused strategy on technology improvement for memory markets, mainly via etching tools, sets it up well for coming process transitions in DRAM, NAND, and (potentially underappreciated by the market) in Logic," – Lisa Kailai Han
The technology sector also sees strategic advancements. Analysts emphasize the importance of focused strategies and diversification. For instance, Lisa Kailai Han highlights the potential of Lam Research Corporation's (LRCX) strategy centered on technology improvements for memory markets.
"We think AMAT's broad diversification, focus on novel materials, and leading market share in technologies enabling node transitions, improved chip efficiency, and Advanced Packaging position it well for an AI-driven growth cycle," – Steve Barger
Similarly, Steve Barger notes Applied Materials' (AMAT) strong positioning due to its broad diversification and leading market share in cutting-edge technologies.
DuPont de Nemours emerges as another focal point in the market. Wolfe Research upgraded shares of the chemical firm to an outperform rating from peer perform. Analyst Chris Parkinson set a price target of $91 for DuPont de Nemours, approximately 19% higher than current trading levels.
"supported by TAM momentum, regulation driven consolidation, bottoming headwinds, and top-line synergies," – Jeffrey Stantial
Analysts attribute this positive outlook to various factors including TAM momentum and regulation-driven consolidation.
Despite overall optimism, some analysts urge caution based on historical trends.
"We've already set a low this year that undercut the prior December low," – Sam Stovall
Sam Stovall warns about early indicators that have not been favorable.
"Historically, whenever we have a low in the first quarter of a new year that has undercut the prior December low, the frequency of a gain is a coin toss — 50%. The average price change was a very slight decline," – Sam Stovall
He notes that historically, when lows in the first quarter undercut December lows, gains are uncertain.
Meanwhile, Flutter Entertainment enjoys remarkable growth with shares surging 56% over the past year. This surge highlights investor enthusiasm for companies showing resilience and growth potential.