The historic rally in U.S. stocks continued to power ahead, with the S&P 500 closing within a striking distance of its 5,000 milestone. 

Gains on Wednesday were fueled by a renewed surge in tech megacaps and a strong sale of 10-year Treasuries that dimmed supply concerns. While bonds barely budged, equities extended a torrid surge from their October 2022 lows on prospects that a solid economy will continue fueling corporate profits. Traders shrugged off concerns about lofty valuations, February’s weak seasonality and cautious commentary from Federal Reserve officials — with stocks hitting fresh records.

“The market continues to climb the wall of worry, including shifting Fed expectations, geopolitical tension, and overbought market conditions,” said Mark Hackett at Nationwide. “We are entering a sluggish seasonal period, but the market has strong momentum.”

That positive tone in equities continued to prevail after the U.S. government sold a record US$42 billion of 10-year Treasuries at a lower-than-anticipated yield — a sign of confidence the Fed will pivot to rate cuts this year.

“The 10-year note auction was pretty good,” said Peter Boockvar, author of the Boock Report.

Also on Wall Street’s radar was a raft of central bank speakers — all showing no rush to cut rates as already signaled by Fed Chair Jerome Powell.

Governor Adriana Kugler presented an optimistic case for a continued slowdown inflation while indicating little urgency to reduce borrowing costs. Fed Bank of Boston President Susan Collins said she’s looking for more evidence that inflation is durably set to align with the target before moving to cut rates — though that step is likely “later this year.” Her Minneapolis counterpart Neel Kashkari told CNBC that said officials need to see “a few more months” of inflation data before easing policy.

“Our base case is still for a soft landing where growth slows throughout the year, but remains healthy overall, while inflation does not prove to be overly sticky,” said Solita Marcelli at UBS Global Wealth Management. “And we do believe this environment will allow the Federal Reserve to start cutting rates by May, and by 100 basis points through year-end.”

Following the steps of all major U.S. equity benchmarks, the MSCI World Index of developed-market shares also rose to a record.

Resilient economic growth in the U.S. and an expected rebound in Europe are likely to support equities — even as some parts of the stock market look “frothy,” according to Barclays strategists led by Emmanuel Cau.

While one of the world’s largest exchange-traded funds sits at a crucial inflection point following a torrid 22 per cent rally since late October, further gains may be in store in the coming weeks. The $244 billion Invesco QQQ Trust Series 1 (QQQ), which that tracks the Nasdaq 100, is trading near key resistance levels from three years ago relative to the broader SPDR S&P 500 ETF, better known by its ticker SPY. 

If resistance from February 2021 is decisively pierced, the QQQ/SPY ratio is poised to rally more from here, with bullish confirmation for QQQ on absolute basis climbing to a new high, according to Anthony Feld at Bloomberg Intelligence.

Corporate Highlights:

• Ford Motor Co., buffeted by electric vehicle losses and rising labor costs, posted fourth quarter results that soundly beat expectations and forecast higher profits in 2024.
• Roblox Corp., a gaming company, reported higher-than-ever revenue and player counts.
• Snap Inc., the parent company of the Snapchat app, reported lower-than-projected revenue over the peak holiday season, disappointing investors just a week after much-larger rival Meta Platforms Inc. posted its best sales growth in two years.
• Alibaba Group Holding Ltd. green-lit another $25 billion in stock repurchases, aiming to assuage investors worried about plateauing growth at a Chinese e-commerce and cloud pioneer struggling to fend off new rivals such as PDD Holdings Inc.
• Uber Technologies Inc. reported gross bookings that beat analyst estimates, showing strong global demand for rides and food delivery during the holiday period.
• Chipotle Mexican Grill Inc.’s fourth-quarter sales and profit beat expectations as both transactions and check sizes rose, defying fears of waning consumer sentiment.
• 23andMe Holding Co. Chief Executive Officer Anne Wojcicki is considering splitting the DNA testing company’s consumer and therapeutics businesses in an effort to revive a sagging stock price and avoid being delisted

Key events this week:

• China PPI, CPI, Thursday
• U.S. wholesale inventories, initial jobless claims, Thursday
• Treasury Secretary Janet Yellen speaks at a Senate banking committee hearing on the Financial Stability Oversight Council annual report, Thursday
• Pharma CEOs speak at a Senate panel on prescription drug prices, Thursday
• ECB Chief Economist Philip Lane speaks, Thursday
• ECB publishes economic bulletin, Thursday
• U.S. CPI revisions, Friday
• Germany CPI, Friday
• President Joe Biden hosts German Chancellor Olaf Scholz at the White House, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.8 per cent as of 4 p.m. New York time
• The Nasdaq 100 rose 1 per cent
• The Dow Jones Industrial Average rose 0.4 per cent
• The MSCI World index rose 0.6 per cent

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro rose 0.2 per cent to $1.0773
• The British pound rose 0.2 per cent to $1.2625
• The Japanese yen fell 0.2 per cent to 148.18 per dollar

Cryptocurrencies

• Bitcoin rose 2.3 per cent to $44,161.79
• Ether rose 2.4 per cent to $2,437.57

Bonds

• The yield on 10-year Treasuries advanced two basis points to 4.12 per cent
• Germany’s 10-year yield advanced two basis points to 2.32 per cent
• Britain’s 10-year yield advanced four basis points to 3.99 per cent

Commodities

• West Texas Intermediate crude rose 1.1 per cent to $74.13 a barrel
• Spot gold was little changed