U.S. stock futures rose on Monday, putting the S&P 500 on track for another record high, as investors became more optimistic about the health of the economy and looked to upcoming earnings for signs of the technology's artificial intelligence boom.
S&P 500 futures (^GSPC) rose 0.3% after the index posted its first record close since January 2022 on Friday. Dow Jones Industrial Average (^DJI) futures rose nearly 0.2%, while tech-heavy Nasdaq 100 (^NDX) futures jumped 0.6%.
An AI-fueled rally in technology stocks helped pull stocks out of their early 2024 doldrums, pushing major indexes into positive territory for January. Given this, quarterly results from the likes of Netflix (NFLX) and Tesla (TSLA) later this week will be closely watched, as tech earnings performance could indicate which direction the market is headed in the short-term.
Meanwhile, Federal Reserve officials whose comments weighed on stocks will remain calm ahead of the next meeting of policymakers on January 30. But readings on GDP and the Fed's preferred measure of inflation later in the week could shed light on the debate that has exacerbated the situation. Driving the Markets: When the Fed focuses on lowering interest rates.
Read more: What a pause on federal interest rate hikes means for bank accounts, CDs, loans and credit cards
In individual stocks, Boeing ( BA ) came under more pressure after the Federal Aviation Administration urged airlines to conduct inspections on another class of 737 planes that use the same door plugs used on the MAX 9 plane that was involved in a mid-air explosion.
Meanwhile, shares of Archer-Daniels-Midland (ADM) fell 12% pre-market. The agri-trading giant has placed its chief financial officer on leave and cut its profit forecasts as it faces an investigation into its accounts.
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A long break between record highs is bullish for stocks
The stock market closed at a record high on Friday.
Early Monday, futures were pointing to further gains.
While regular readers are likely familiar with the refrain, at this point, that stocks typically rise, history offers even more support for the idea that a gap of more than two years between record closes portends good things to come for US stocks.
In a note to clients Monday, Keith Lerner, co-CEO of Truist Wealth's IT division, noted that in 13 out of 14 previous instances, the S&P 500 had gone at least a year between record closes, and the index was higher a year later. The average 12-month return during these periods was 14%, well above the S&P 500's average annual gain of 10%.
Lerner points out that the only example in which this failed was in May 2007, when the global financial crisis erupted a year later amid the collapse of the US housing market under the pressure of high interest rates. “This reiterates the importance of the business cycle and the Fed's ability to stick to the soft landing that is now being played out in the markets,” Lerner noted.
After long breaks between record closes, stocks tend to perform better than average over the next 12 months. (Source: Trust IAG, FactSet)
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