US stock futures rose on Monday to put the S&P 500 on track for another record high, as investors became more upbeat about the health of the economy and looked to coming earnings for signs of an AI boom for techs.
S&P 500 (^GSPC) futures gained 0.3% after the index notched its first record close since January 2022 on Friday. Dow Jones Industrial Average (^DJI) futures added roughly 0.2%, while those on the tech-heavy Nasdaq 100 (^NDX) jumped 0.6%.
An AI-fueled surge in tech shares has helped pull stocks out of their early-2024 doldrums, bringing the major indexes into positive territory for January. Given that, quarterly results from the likes of Netflix (NFLX) and Tesla (TSLA) later this week will be closely watched, as how tech earnings perform could well indicate where the market heads in the short term.
At the same time, the Federal Reserve officials whose comments have buffeted stocks will stay quiet ahead of policymakers’ next meeting on Jan. 30. But readings on GDP and the Fed’s preferred inflation gauge later in the week could shed light on the debate that has been driving markets: when the Fed will pivot to cutting interest rates.
Read more: What the Fed rate-hike pause means for bank accounts, CDs, loans, and credit cards
In individual stocks, Boeing (BA) came under more pressure after the FAA urged airlines to carry out checks on another class of 737 jet that uses the same door plugs as on the MAX 9 that suffered a midair blowout.
Meanwhile, Archer-Daniels-Midland (ADM) shares sank 12% in premarket. The agricultural trading giant has placed its CFO on leave and cut its earnings outlook as it faces a probe into its accounts.
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A long break between record highs is bullish for stocks
The stock market closed at a record high on Friday.
Early Monday, futures were pointing to further gains.
And while regular readers are likely familiar with the refrain, at this point, that stocks usually go up, history offers more support than this to the notion that the more than two year break between record closes portends good things ahead for US equities.
In a note to clients on Monday, Keith Lerner, co-CIO at Truist Wealth, noted that in 13 of the 14 prior instances the S&P 500 went at least a year between record closes the index was higher a year later. The average 12-month return over these periods stood at 14%, well above the ~10% average annual gain realized by the S&P 500.
Lerner notes the one instance this failed was May 2007, as the global financial crisis broke out a year later amid the collapse of the US housing market under the strain of high interest rates. “This reiterates the importance of the business cycle and the ability of the Federal Reserve (Fed) to stick the soft economic landing which is now being baked into markets,” Lerner noted.
After long breaks between record closes, stocks tend to do better than average over the next 12 months. (Source: Trust IAG, FactSet)
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