A rally in some of the world’s largest technology companies fuelled a rebound in stocks, with traders also weighing the latest economic data and Fedspeak for clues on the U.S. central bank’s next steps.

After a back-to-back slide, the S&P 500 rose as bond-market volatility abated. The Nasdaq 100 closed at an all-time high as Apple Inc. climbed on an analyst upgrade and Taiwan Semiconductor Manufacturing Co.’s outlook lifted chipmakers on hopes for a global tech recovery in 2024.

Stock traders were unfazed by data underscoring labour-market strength at a time when Fed officials are looking for signs of a slowdown as they contemplate cutting rates. Fed Bank of Atlanta President Raphael Bostic urged policymakers to proceed cautiously toward easing given the potential impacts of unpredictable events from elections to global conflicts. His Philadelphia counterpart Patrick Harker said he expects inflation to keep ebbing toward the 2 per cent target.

“Given the underlying strength of the U.S. economy, it’s difficult to get too bearish at this point,” said Chris Zaccarelli at Independent Advisor Alliance. “The pervasive pessimism and doubt about the stock market and economy is a contrarian signal and one of the best reasons to push against the crowd. Once the last skeptic has been converted, the market will be again vulnerable to a large shock, but we aren’t at that point yet.”

The S&P 500 closed at 4780.94, while the Nasdaq 100 1.5 per cent. A gauge of chipmakers climbed almost 3.5 per cent. Treasury two-year yields remained around 4.35 per cent. Oil rose to $74 a barrel. Bitcoin slid below US$41,000.

The rebound in stocks suggests things are a lot calmer, but that’s not to say conditions will remain that way, according to Fawad Razaqzada at City Index and Forex.com. He cited a growing perception that big central banks might not lower interest rates as much or as soon as the market thought they would.

“There’s clearly a desperate desire to cling on to the optimism that enabled such a strong end to the year, but unlike in that period, the data isn’t really playing ball,” said Craig Erlam at Oanda. “The releases we’ve seen so far this month have been fine and in the main, perfectly in keeping with the expectations people had coming into 2024. But is that enough?”

Blackstone Inc. Chief Executive Officer Steve Schwarzman said he expects the Fed to lower rates and sees “animal spirits” returning to the markets as more investors make that bet too. The Fed’s timing on rate declines won’t be clear, creating a “baffling effect” among investors, he told Bloomberg Television on the sidelines of the World Economic Forum.

Coming off its best winning streak in two decades, the S&P 500 has run into a roadblock in 2024, with its all-time closing record set two years ago remaining elusive. But a technical gauge that measures the momentum to buy or sell stocks signals that bulls are still stepping in to snap up shares.

The index’s DVAN trend line — a proprietary divergence analysis that measures buying or selling pressure — has been on a buying streak since the S&P 500 bottomed in late October, with investors continuing to scoop up shares in multiple trading sessions heading into the closing bell in the past week.

To Dan Wantrobski at Janney Montgomery Scott, while markets have stabilized after the recent weakness, a “bumpy path” is still expected.

“There are many conflicting market internals/technicals appearing on the charts right now — which should make for a choppy, range-bound glide path over the near term,” Wantrobski noted.

After being caught flat-footed early last year, fund managers have gone all-in on technology stocks — so much so that it’s sparking warnings that the Nasdaq 100 is looking ever more vulnerable to investor pullbacks.

Hedge funds hold the highest level of net-long Nasdaq 100 futures in nearly seven years, according to Societe Generale’s weighted analysis of data on the Nasdaq 100 Index futures and e-mini contracts provided by the Commodities Futures Trading Commission. Meanwhile, a global fund manager survey from Bank of America Corp. this month showed the most-crowded trade is being long the “Magnificent Seven” stocks and other tech-related growth shares as a way to play the prospect of Fed easing.

Matt Maley at Miller Tabak + Co. says that as much as he’s worried about the return of the “narrow stock market,” some hope does exist that it can broaden out.

The news coming out of the chip industry is “definitely bullish,” and “if it can cause a significant and sustainable move above the late-2023 highs, it’s going to be something that should push the stock market higher going forward,” Maley noted.

Corporate Highlights:

• Humana Inc. shares plummeted after preliminary earnings missed estimates on higher-than-expected costs of members’ care and the Medicare-focused insurer forecast anemic enrollment growth for this year.
• Spirit Airlines Inc. tumbled again as investors took little solace from a pledge by the airline to strengthen its balance sheet in the wake of a failed takeover of the deep-discount carrier.
• Boeing Co. won an order for 150 Max jets from India’s newest airline, in a rare spot of good news for the U.S. planemaker since a piece of fuselage blew off an Alaska Airlines flight almost two weeks ago.
• Nelson Peltz said Walt Disney Co. is unable to heal “self-inflicted wounds” under current leadership and should be aiming for “Netflix-like margins,” days after the entertainment giant knocked back the activist’s bid for a seat on its board.
• Bayer AG is leaning against breaking up the conglomerate, rejecting pleas from investors frustrated by the company’s ongoing struggle to recover from its costly purchase of Monsanto, according to people familiar with the matter.
• Birkenstock Holding Plc’s growth targets failed to satisfy traders who were hoping for more from the German sandal maker.
• KeyCorp reported fourth-quarter profit that fell short of analysts’ estimates and predicted net interest income would decline this year.
• Goodyear Tire & Rubber Co. named Stellantis NV executive Mark Stewart as chief executive officer following a pressure campaign by shareholder activist Elliott Investment Management.
• Discover Financial Services posted a 62 per cent drop in fourth-quarter profit as the company continued to grapple with the fallout from compliance and risk-management lapses that led to the resignation of its chief executive officer last year.

Key events this week:

• Canada retail sales, Friday
• Japan CPI, tertiary index, Friday
• U.S. existing home sales, University of Michigan consumer sentiment, Friday
• ECB President Christine Lagarde and IMF Managing Director Kristalina Georgieva speak in Davos, Friday
• San Francisco Fed President Mary Daly speaks, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.9 per cent as of 4 p.m. New York time
• The Nasdaq 100 rose 1.5 per cent
• The Dow Jones Industrial Average rose 0.5 per cent
• The MSCI World index rose 0.7 per cent

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro fell 0.1 per cent to $1.0869
• The British pound rose 0.2 per cent to $1.2699
• The Japanese yen was little changed at 148.19 per dollar

Cryptocurrencies

• Bitcoin fell 4.2 per cent to $40,850.5
• Ether fell 3.1 per cent to $2,446.11

Bonds

• The yield on 10-year Treasuries advanced four basis points to 4.14 per cent
• Germany’s 10-year yield advanced three basis points to 2.35 per cent
• Britain’s 10-year yield declined six basis points to 3.93 per cent

Commodities

• West Texas Intermediate crude rose 2.1 per cent to $74.07 a barrel
• Spot gold rose 0.8 per cent to $2,022.08 an ounce

This story was produced with the assistance of Bloomberg Automation.