All 11 sectors of the S&P 500 index rose, led by a 1.7% rise in consumer discretionary stocks. Technology stocks largely followed suit, rising 1.5%, reversing losses from early trading. Nvidia soared 4%, lifting the Dow, Nasdaq and S&P 500.
The strong session comes after a tough start to the year, with the S&P 500 and Nasdaq ending with five straight sessions of declines. This pattern differs from the historical trend of markets rising from late December to early January. Despite Friday’s gains, the major indexes are still poised for a weekly decline of about 1%.
How are investors responding to President Trump’s policy agenda?
Market sentiment remains mixed as investors assess the potential economic impact of Mr. Trump’s policy proposals. With Republicans in control of Congress, Trump’s policies could boost growth through corporate tax cuts and deregulation. However, tariff and immigration policies raise concerns about inflation.
Analysts believe a clearer direction for the market could emerge by late January if the new administration launches pro-business initiatives. Michael Matousek of US Global Investors said bullish sentiment could increase as policy solidifies.
Interest rate outlook and economic signals
Economic indicators continue to reflect resilience, with manufacturing activity showing signs of recovery. As a result, expectations for aggressive interest rate cuts by the US Federal Reserve (Fed) have faded. CME Group’s FedWatch tool suggests traders are expecting the first rate cut around May.
U.S. Treasury yields remain high, with the 10-year yield above 4.5%, indicating continued inflationary pressures.
