Stocks on the Brink of Record as Earnings Roll In: Markets Wrap

(Bloomberg) — A batch of earnings from industry heavyweights powered stocks to the brink of all-time highs in a continuation of the rally fueled by the strength of Corporate America.

Equities extended their gains for the year, with the S&P 500 hovering near 6,100. Netflix Inc. surged 11% after closing 2024 with its biggest quarterly subscriber gain in history. Travelers Cos. and Procter & Gamble Co. also climbed after strong results. Oracle Corp. soared 7% on a $100 billion joint venture with SoftBank Group Corp. and OpenAI, an effort unveiled with President Donald Trump aimed at speeding development of artificial intelligence.

“The market is off to a good start to President Trump’s second term,” said Matt Maley at Miller Tabak. “If this earnings season is a good one, it’s a rally that could have legs. However, it will take more than merely ‘beating expectations’ to fuel a further rally of significance.”

Despite the recent broadening of the equity market beyond a handful of megacaps, big tech led the way on Wednesday — and most companies in the S&P 500 actually fell. Poor breadth has been a major concern of investors, especially among those nervous about sky-high valuations and frothy AI stocks.

JP Morgan Chase & Co. Chief Executive Officer Jamie Dimon said there are signs that the US stock market is overheated.

“Asset prices are kind of inflated,” Dimon said in a CNBC interview Wednesday. “You need fairly good outcomes to justify those prices, and we’re all hoping for that.”

The S&P 500 rose 0.6%. The Nasdaq 100 climbed 1.4%. The Dow Jones Industrial Average added 0.2%. A Bloomberg gauge of the “Magnificent Seven” megacaps gained 1.5%. The Russell 2000 fell 0.3%.

The yield on 10-year Treasuries was little changed at 4.58%. The Bloomberg Dollar Spot Index wavered.

After the S&P 500 soared 24% in 2023 and 23% in 2024, lofty valuations brought some discussion on whether the benchmark will be able to achieve such a performance again this year.

Back-to-back annual gains of over 20% for the S&P 500 do not necessarily make US equities due for a pullback, as history shows the market has typically continued to deliver solid, albeit more muted, returns in the following year,” said Jeff Schulze at ClearBridge Investments. “Further, the current rally is far from the longest without a correction.”

Schulze also noted that earnings growth has largely been concentrated amongst a small group of stocks in recent years. This is expected to shift in 2025 with a broadening of earnings participation, which should lead to improved relative performance for small/mid cap and value laggards.

“While we continue to watch the new administration’s next moves closely, investor should not lose sight of the fundamentals that remain favorable for US equities,” said Solita Marcelli at UBS Global Wealth Management. “Without taking any single-name views, we continue to like technology, utilities, and financials, and see value in utilizing structured strategies to navigate near-term volatility.” 

“The stock market’s ‘January effect’ is taking shape so far, with stocks performing strongly throughout the month,” said John Creekmur at Creekmur Wealth Advisors. “Investors are now more focused on earnings and hopes for tax cuts and deregulation from the new Trump administration, and less so about worries of fewer Federal Reserve rate cuts this year.”

The Nasdaq 100 has nearly doubled since the start of 2023, adding $14 trillion in value in the process. Evercore ISI’s Rich Ross is prepared for that rally to continue, shrugging off fears of a familiar nemesis: bond yields.

Treasury rates jumped to multi-month highs last week as investors parsed economic data for clues on the Federal Reserve’s next interest-rate cut. The yield on the US 10-year has since pulled back after hitting a relative strength reading that usually signals a retreat. Pair that with positive technical signals and the Nasdaq 100 and S&P 500 Index both appear poised to hit fresh all-time highs in the first quarter, according to Ross. 

“At the end of the day technology remains in an outstanding position to continue to lead this market higher,” Ross said.

Corporate Highlights:

• Netflix Inc. shares soared after the streaming giant reported its biggest quarterly subscriber gain in history, buoyed by its first major live sporting events and the return of Squid Game.
• United Airlines Holdings Inc. expects a solidly profitable first quarter as the carrier capitalizes on strong demand during the winter months, a surprising shift from a normally sluggish travel period.
• Procter & Gamble Co. organic sales surpassed estimates on higher volume, a change from earlier quarters where most of the company’s growth came from price hikes.
• Johnson & Johnson said a strong dollar will cut into 2025 revenue and profit, pushing its forecast below analysts’ expectations and driving its shares lower.
• Abbott Laboratories is forecasting lower-than-expected first-quarter earnings but full-year profit in line with Wall Street estimates as the health care company points to strong demand for its medical devices as a growth driver this year.
• Ally Financial Inc. fourth-quarter earnings surged as its net interest margin beat analysts’ estimates and expenses and provisions for bad debt declined. Shares of the company soared as much as 11%.
• Venture Global Inc. slashed the marketed range for its initial public offering, lowering the market value it could fetch.

Key events this week:

• Eurozone consumer confidence, Thursday
• US jobless claims, Thursday
• Bank of Japan policy meeting, Friday
• Eurozone HCOB Manufacturing & Services PMI, Friday
• US University of Michigan consumer sentiment, existing home sales, S&P Global Manufacturing & Services PMI, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.6% as of 10:32 a.m. New York time
• The Nasdaq 100 rose 1.4%
• The Dow Jones Industrial Average rose 0.2%
• The Stoxx Europe 600 rose 0.4%
• The MSCI World Index rose 0.6%
• Bloomberg Magnificent 7 Total Return Index rose 1.5%
• The Russell 2000 Index fell 0.3%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro fell 0.1% to $1.0417
• The British pound fell 0.2% to $1.2322
• The Japanese yen fell 0.5% to 156.24 per dollar

Cryptocurrencies

• Bitcoin fell 2.3% to $104,310.51
• Ether fell 1.6% to $3,278.84

Bonds

• The yield on 10-year Treasuries was little changed at 4.58%
• Germany’s 10-year yield was little changed at 2.51%
• Britain’s 10-year yield advanced two basis points to 4.61%

Commodities

• West Texas Intermediate crude was little changed
• Spot gold rose 0.3% to $2,754.04 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Cecile Gutscher, Sujata Rao, Robert Brand and Aya Wagatsuma.

©2025 Bloomberg L.P.