Stocks rose on Friday, with the S&P 500 index closing above 5,000 for the first time amid a rally fueled by better-than-expected earnings reports.
The move comes less than a month after the index returned to record territory, surpassing a high set in January 2022. The benchmark, which tracks the stock performance of the largest companies in America, is the foundation of many portfolios and retirement plans and is the most common gauge of sentiment on Wall Street.
The rally in the stock market has come with inflation cooling, corporate profits growing and lower borrowing costs on the horizon.
The S&P 500 climbed 0.6 percent on Friday to close at 5,026.61. It is now up more than 5 percent since the start of the year, and up nearly 40 percent since its October 2022 low.
The Russell 2000, an index that measures smaller companies more closely tied to the health of the economy, rose 1.5 percent on Friday but remained roughly flat for the year. The tech-heavy Nasdaq Composite also rose, 1.25 percent, on Friday.
What’s Driving Stocks Higher?
Technology stocks have played a big role in the recent run.
Tech giants, including Apple, Microsoft, Meta, Amazon and Alphabet, have enormous sway over the index because of their size, and after they reported earnings last week, several of these stocks have soared.
Meta gained over 20 percent last week, adding hundreds of billions of dollars to its market capitalization, after the company reported that its profits had tripled in the last quarter. The company eased back 1.5 percent this week.
Microsoft — which recently surpassed Apple as the most valuable publicly traded company — announced a 33 percent rise in profits last week. Its shares are up 12 percent this year.
Amazon, the online retail giant, also reported a boost in sales in its most recent quarter, underscoring a strong holiday shopping season. Its shares are up 15 percent so far this year.
The rally hasn’t been limited to tech stocks: Disney, Ford and Chipotle, for instance, also reported earnings in the past week that beat analyst estimates and pushed their shares higher. Nearly 70 percent of the companies in the S&P 500 had reported earnings as of Friday, with three-quarters of those reports better than expected, according to FactSet.
Underpinning gains in the past few months is the bet that the Federal Reserve will start lowering interest rates later this year now that inflation has shown signs of slowing. The gains in the S&P 500 have continued even after the Fed signaled that it wouldn’t move as quickly as investors had initially hoped.
Jerome H. Powell, chair of the Federal Reserve, said on Sunday that policymakers needed to see more evidence that inflation was under control before it moved to cut rates. Investors now predict that the Fed will cut rates in May instead of March.