By the Global Finance & Markets Breaking News team

(Reuters) – The S&P 500 posted a record high close on Friday for the first time in two years, fueled by a rally in chipmakers and other heavyweight technology stocks on optimism around artificial intelligence.

The milestone confirmed that the benchmark index has been in a bull market since it closed at its low on Oct. 12, 2022, according to one measure, which also puts that date as the end of a bear market.

According to preliminary data, the S&P 500 gained 58.02 points, or 1.21%, to end the day at 4,838.96 points.

The index lost nearly 25% in a selloff between its previous record close of 4,796.56 on Jan. 3, 2022 and its low in October 2022.

COMMENTS:

RICK MECKLER, PARTNER, CHERRY LANE INVESTMENTS, NEW VERNON, NEW JERSEY

“The main feeling I have is technology stocks continue to power the market to levels that seem to just generate even more interest. It’s not like going higher causes people to take profits. Going higher causes people to want to get greater involvement.

“Normally this time of year you have new inflows both from 401ks and other retirement accounts, and you often have new commitment to capital to start the year. The elements were there for the market to make a new high, continuing off last year’s run.

“The only negative is the interest rate environment, and investors remain convinced we’re not long for rate cuts even though there hasn’t been a meaningful drop-off in inflation that suggests rate cuts are imminent.”

SAMEER SAMANA, SENIOR GLOBAL MARKET STRATEGIST, WELLS FARGO INVESTMENT INSTITUTE, CHARLOTTE, NORTH CAROLINA

“The question now is what comes next.  Unfortunately, much of the recent move to round-trip to the all-time highs has come as a result of the markets expecting a combination of aggressive rate cuts, a still-strong economy, low inflation, and easy financial and credit conditions; those factors don’t happen together all that often.  We believe the market’s disappointment upon realizing that its investment case is built on hope, rather than reality will lead markets to test important support levels.

“Currently, we believe the S&P 500 Index sits close to resistance, and has pulled forward typically favorable spring seasonality.  From here, a pullback toward key support levels seems likely.

“In the meantime, investors should stay disciplined and defensively positioned.”

STEVE SOSNICK, CHIEF STRATEGIST, INTERACTIVE BROKERS, CONNECTICUT

“This new record level of the S&P 500 is sustainable as long as earnings meet expectations in the coming weeks. The rationale is that companies can deliver on their earnings if the economy is solid. If, on the other hand, we find out that the market has either gotten ahead of itself about earnings expectations, or we get guidance from some of these companies that doesn’t match the bullish sentiment that’s being priced into them, that can be a real risk”

“I think the more important thing right now is earnings because the market is telling us in the last couple of days that they’re focused more on companies’ ability to meet or exceed earnings expectations than they are about being bailed out by Federal Reserve rate cuts.”

JOHN LYNCH, CHIEF INVESTMENT STRATEGIST, COMERICA WEALTH MANAGEMENT, CHARLOTTE, NC (emailed note)

“Liquidity is a powerful force.

“Despite the Fed’s attempt to quell demand by raising rates and draining its balance sheet, the money supply as measured by M2 remains ~30.0% greater than it was before the pandemic.  This provides a tailwind for the financial markets, enabling equities to sustain momentum from the fourth quarter’s rally.

“We suspect concerns over the prospects for a “double-top” to ensue, yet we look for the combination of expanded liquidity, 8.0% earnings growth, and declining inflation-adjusted or ‘real’ interest rates to support higher market multiples as the year progresses.

“We continue to believe the S&P 500 would be fairly valued in the 5,200 range by yearend.”

CAROL SCHLEIF, CHIEF INVESTMENT OFFICER, BMO FAMILY OFFICE, MINNEAPOLIS, MN

“Records are made to be broken and the broadening of market action in the past few months is reassuring.  The resiliency of the U.S. economy in general, and most businesses in particular, has been notable. It’s reflected in continued progress in corporate earnings as companies hone their business models.”

“Our full year expectation is for continued upward progress in stocks as Fed increases cease (and cuts commence), the labor market comes into better balance, inflation moderates, the trillions in fiscal stimulus for infrastructure and new techs continues to be deployed and consumers remain constructive.”

RHYS WILLIAMS, CHIEF STRATEGIST, SPROUTING ROCK ASSET MANAGEMENT, BRYN MAWR, PENNSYLVANIA

“The fact is the market has really been narrow so far in January. It’s not like the whole market is in some sort of ebullient fervor. It’s been very specific to AI-related technology stocks.

“I’m not so worried about the overall market, because it’s not like the whole market is indicating some sort of giant rush the way it was in November and December when everything was working.” 

TOM GRAFF, HEAD OF INVESTMENTS AT FACET, BALTIMORE, MARYLAND

“Stocks have bounced around a bit this year based on consternation over the Fed. But what we’re seeing is that earning potential is really what’s paramount. That’s why things like TSM strong outlook are trumping questions about Fed rate cuts.”

BRIAN MULBERRY, CLIENT PORTFOLIO MANAGER, ZACKS INVESTMENT MANAGEMENT, CHICAGO

“There is still a significant amount of momentum in the S&P 500 valuation right now even though the March rate cut expectations have moved measurably lower, the May probability factor is still at 90%+.  It would technically still be possible to meet the market’s current pricing of six rate cuts if the Fed skips March, that is giving some durability to the current valuation…If the Fed continues to keep rates unchanged through May then we must see assets repriced in a ‘higher for longer’ rate environment.“Recent comments from FOMC members remain consistent in that no members (especially voting members) have said clearly that rates will be moved lower in March, in fact the most recent data is showing an uptick in economic activity that could spur an uptick in inflation – this seems the more likely case than a capitulation in prices which is what would be needed to see rates fall in just 10 weeks’ time.” 

DAVID WAGNER, PORTFOLIO MANAGER, APTUS CAPITAL ADVISORS, CINCINNATI, OHIO

“All of the economic data has remained strong and many people assume that to be bad for the market, as it decreases the chance of a Fed rate cut. But if we take a step back, good economic data should be great for the market, especially when many investors feel that valuation is stretched.”

THOMAS HAYES, CHAIRMAN, GREAT HILL CAPITAL, NEW YORK

“Everyone was looking for a big correction after the strong end of year. People still don’t believe the rally that started in October 2022 and now we are breaking out to new highs. We just need to convert all the holdout perma-bears over the next few weeks and then we’ll get the pullback when no one expects it.”

ANTHONY SAGLIMBENE, CHIEF MARKET STRATEGIST, AMERIPRISE FINANCIAL, TROY, MICHIGAN

“Stocks continue to demonstrate their resiliency despite a muted start to the year.

“This week’s gains across Big Tech, which is helping push the broader indexes toward record highs, demonstrates investors are unwilling to abandon last year’s winners. And despite a modest uptick in government bond yields this month, stocks continue to discount a soft landing for the U.S. economy in 2024.”

CYRUS AMINI, CHIEF INVESTMENT OFFICER, HELIUM ADVISORS, CHARLESTON, SOUTH CAROLINA

“The S&P500 spent most of 2023 defying pundits and investors alike to put in some spectacular results. The overall index performance was almost entirely driven by the newly christened “Magnificent Seven”, which now accounts for roughly 30% of the index. That type of concentration has only been seen in the dot-com bubble. Once you include the lower probability of rate cuts due to a weakening labor market and inflation leveling out, we have a market that looks overbought and overdue for valuations to move back in line with earnings. We don’t see a massive drawdown as likely, but equities have to return to reality sooner rather than later.”

LISA ERICKSON, HEAD OF PUBLIC MARKETS, U.S. BANK WEALTH MANAGEMENT, MINNEAPOLIS

“It really is an encouraging day in terms of the action, and 4,800 certainly has been a key level which has been difficult to surmount. So if we continue to move in this direction, that’s going to be a very positive sentiment sign.”