The S&P 500 stock index approached its highest level in more than a year on Monday, with investors adding to a rally powered by shares of large tech companies.
The blue-chip US equities measure was up 0.9 per cent, putting it on track to surpass a peak reached last August and mark its highest close since April 2022. The tech-heavy Nasdaq Composite added 1.5 per cent.
US stocks remain well below all-time highs reached in late 2021, but they have started the year strongly. Last week the S&P was up 20 per cent from its lows in October, meeting a common definition of a bull market.
The gains have been pronounced in the semiconductor and software industries, which have advanced 33 per cent and 19 per cent in the past 12 months, respectively, with recent enthusiasm for artificial intelligence boosting their performance.
“A very few number of stocks have driven the S&P,” said Lou Brien, a market strategist at DRW Trading. “This is an unusual circumstance that brings us here.”
Investors this week are preparing for US inflation data and important central bank policy meetings.
Monday’s equities rally left out oil stocks, as the S&P 500 energy sector dropped 0.8 per cent, making it the biggest faller on the index. Oil prices have fallen despite a recent production cut announced by Saudi Arabia, with traders focusing on strong supplies elsewhere and demand growth in China. Brent crude settled down 3.9 per cent to $71.84 a barrel.
Stocks were buoyed by bets that the Federal Reserve would resist raising interest rates when it meets on Tuesday and Wednesday, marking the first pause in the central bank’s 14-month campaign to tame inflation.
“With signs that the economy is shuffling off into a potential recession, the expectation is that [Fed policymakers] are likely to keep rates on hold,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
The latest US consumer price index report will be published on Tuesday. It is expected to show that headline inflation slowed to 4.1 per cent year on year in May, according to economists surveyed by Reuters.
The reading would mark a significant improvement from the 4.9 per cent rate in April, after a 5 per cent figure in March, and would give the Fed more room to pause.
“Any deviation from the forecast path is likely to cause a jolt of volatility on markets,” Streeter said.
In Europe, the region-wide Stoxx 600 closed 0.2 per cent higher, while France’s Cac 40 added 0.5 per cent and Germany’s Dax advanced 0.9 per cent.
Economists are still convinced that the European Central Bank will raise its deposit rate by another quarter percentage point when policymakers meet on Thursday.
“We see another [quarter-point] rate increase from the ECB on Thursday as a near certainty,” said Matthew Ryan, head of market strategy at Ebury, a UK foreign exchange payments group.
“Although the Governing Council is once again likely to keep its cards close to its chest, and steer clear of providing any clear forward guidance.”
In Asia, equities rose, with China’s CSI 300 up 0.2 per cent, while Hong Kong’s Hang Seng index added 0.1 per cent and Japan’s Topix advanced 0.7 per cent.
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