Technology stocks remain the poster child for the latest Wall Street revival, helping to push the benchmark S&P 500 to a fourth consecutive closing high.
Outside tech, there were some mixed earnings updates and the Dow slipped on the lesser-than-expected performance of some old economy stocks. Even so, the performance from the growth engine which is tech more than offset such concerns, with International Business Machines Corp (NYSE:IBM) shares moving sharply higher following the bell after beating earnings and revenue estimates. This followed a tailwind from a surge in Netflix Inc (NASDAQ:NFLX) shares on total subscriber record numbers and a higher guidance outlook. The general wave of optimism briefly pushed Microsoft Corp (NASDAQ:MSFT) over the $3 trillion market capitalisation figure for the first time, while upbeat numbers from ASML Holding NV ADR (NASDAQ:ASML) helped push NVIDIA Corp (NASDAQ:NVDA) to fresh record highs.
Tesla Inc (NASDAQ:TSLA) was a blot on the tech landscape, falling by almost 6% following the bell after missing estimates on earnings and revenues, while also warning that volume growth could be lower this year, partly due to strong competition from China. However, of the companies which have reported so far this reporting season, an estimated 70% have beaten expectations in what will continue to be a tough test over the next few weeks as to whether the new elevated valuations can be justified.
The interest rate debate is likely to surface once more today, as fourth-quarter GDP numbers become due and where expected annual growth of 2% would reflect a slowdown form the previous three months. The Federal Reserve’s preferred inflation measure, the Personal Consumption Expenditures index, then falls due on Friday and will give the latest indication as to how far the central bank has gone in achieving its aim of curtailing prices. In the meantime, the more sprightly trading sessions of the last few days have pushed each of the main indices back into positive territory, with the Dow Jones now up by 0.3%, the S&P 500 by 2.1% and the Nasdaq by 3.1% in the year so far.
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In Asian markets, China was the centre of attention and continued its tentative return to form of the last couple of days. The central bank announcement to cut required bank reserves was designed to shore up its tepid economy in terms of increased lending, while other measures which could include supporting asset prices could also provide some relief. However, while the news has on the whole been positively received, the extent and effectiveness of these measures remains to be seen, especially given poor consumer sentiment which brings into question whether demand for loans is existent.
Alongside some potential support for the beleaguered commercial property sector, the range of measures have so far been seen as incremental as opposed to delivering the level of impact which the ailing economy seems to need. More details will emerge over the coming weeks, but in the meantime investors are taking a measured approach as opposed to flocking back to the region until the cumulative effects of any stimulus become apparent.
In the absence of any significant exposure to the tech tailwinds, the FTSE 100 opened largely flat with few stock movements of note. Intermediate Capital Group (LSE:ICP) saw a pop in early exchanges following its trading update on the back of increased assets under management. Elsewhere, the potential for Chinese stimulus saw a tentative trickle of interest in the mining stocks, but the premier index runs the risk of missing out on the latest global rally and has fallen so far this year by 2.7%.
The FTSE 250 meanwhile has also had a tough introduction to the new year, so far having declined by 2.8% with prospects for the UK economy still in doubt. Anaemic economic growth could yet lead to a technical recession being announced in the coming month. In addition, a relatively robust labour market with associated wage rises which are keeping pace with inflation could lead the Bank of England to sit on its hands for the time being before deciding to call for a cut in interest rates.
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