Wall Street traders pushed stocks to another all-time high on speculation the Federal Reserve will be able to engineer a soft landing as the U.S. economy remains fairly resilient and inflation shows signs of cooling.

Equities notched their sixth straight day of gains as the latest economic data defied forecasts for a recession, bolstering the outlook for Corporate America. While such strength implies policymakers would be in no rush to cut rates, a closely watched measure of underlying inflation coming in line with the Fed’s 2 per cent target was seen by many as an encouraging signal.

“There are no recession concerns here, and to make matters even better, we don’t see any accompanying blowout growth in prices that are used in the GDP calculation,” said Charles Hepworth, investment director at GAM Investments. “Stronger growth without inflation is what everyone wants.”

The S&P 500 closed near the 4,900 mark. International Business Machines Corp. soared on a bullish outlook, while Tesla Inc. sank 12 per cent after Elon Musk’s pitch for investors to look past slower sales growth fell flat. In late trading, Intel Corp. gave a disappointing forecast for the current period, signaling that it continues to struggle to defend its once-dominant position in data center chips. 

U.S. 10-year yields dropped five basis points to 4.12 per cent. Swap contracts continued to fully price in a Fed reduction in May, while increasing the expected total cuts this year to around 140 basis points. The euro fell after President Christine Lagarde’s affirmation that the European Central Bank may begin lowering rates from around mid-2024 was taken by markets as a sign that earlier moves are in play.

A survey conducted by 22V Research shows 50 per cent of respondents have lowered their recession expectations since before the December Fed Meeting. When it comes to prospects for 2024 real GDP growth, most investors surveyed expect it will be in-line or stronger than consensus.

The U.S. economy’s fourth-quarter growth trounced forecasts as cooling inflation fueled consumer spending, capping a surprisingly strong year. Gross domestic product increased at a 3.3 per cent annualized rate. A closely watched measure of underlying inflation rose 2 per cent for a second straight quarter.

Rob Swanke at Commonwealth Financial Network says the data should provide enough ammo for U.S. officials to maintain a dovish stance — even if they keep rates where they are. To Callie Cox at eToro, while a recession isn’t out of the question, it looks like the central bank is achieving a soft landing. David Russell at TradeStation says Fed Chair Jerome Powell “can give himself a pat on the back as Goldilocks takes over.”

“It is hard to argue that the economy isn’t strong,” said Chris Zaccarelli at Independent Advisor Alliance. “The stock market will continue to rally as long as the economy stays out of recession and consumers continue to spend – and that is even without the Fed cutting rates. However, if the Fed starts cutting rates, that will be an additional tailwind to this market, which continues to surprise to the upside.”

The market’s resilience suggests that investors are satisfied to see U.S. data resilience despite elevated rates, according to Fawad Razaqzada at City Index and Forex.com. They are confident that peak rates have been reached, and policy will eventually loosen — albeit a bit later than initially expected, he added.

The S&P 500 finished at an all-time high for the first time in two years on Friday, marking a crucial milestone in the resurgence of the U.S. stock market. It’s been a dizzying stretch for equities, triggered by falling inflation and the possibility that the Fed will cut rates in 2024.

With only a few days left for the end of January, the S&P 500 has already blown past the Wall Street consensus over where the index will finish the year. On Wednesday, the gauge surpassed 4,867, the average level where forecasters in a Bloomberg survey pegged it 11 months from now.

With the U.S. stock market at a record, the obvious question for many investors right now is how much firepower is left in the rally that began last year. Whenever the S&P 500 has climbed from a bear market to new heights, returns in the subsequent six and 12 months have been handily above average, Bloomberg Intelligence data going back to 1950 showed.

BI’s analysis of market performance after the U.S. stock benchmark hit a fresh high found the median forward six-month return was roughly 9.2 per cent, above the median 6.3 per cent return for all half-year periods going back more than 70 years. The same pattern is seen in forward 12-month performance, with median returns at 15 per cent after a new all-time high versus just 13 per cent in overlapping yearlong time frames.

“The prevailing trend is undeniably bullish, and the markets are currently adhering to a ‘buy-the-dip’ mentality, at least for the time being,” Razaqzada added. “However, there are signs that the rally may be stretching thin at these levels. So, there is the potential for some profit-taking around current levels.”

Elsewhere, oil rose to the highest in about two months as U.S. inventories, Chinese stimulus and an attack on a Russian refinery ignited a rush of trend-following algorithmic buying.

Corporate Highlights:

• Alphabet Inc., Amazon.com Inc. and Microsoft Corp. must provide information to the U.S. Federal Trade Commission on their investments and partnerships with artificial intelligence startups Anthropic PBC and OpenAI Inc. as part of an agency study announced Thursday.
• Apple Inc. is embarking on a historic overhaul of its iOS, Safari and App Store offerings in the European Union, aiming to placate regulators set to impose tough new antitrust rules.
• Microsoft Corp. will lay off 1,900 people across its video-game divisions including at Activision Blizzard, which it purchased for US$69 billion in an acquisition that closed late last year.
• T-Mobile US Inc. reported gains in mobile subscribers in the fourth quarter, joining rivals in finding new customers in the saturated and competitive wireless market.
• The chorus of Boeing Co. critics grew louder as more top airline executives called out the planemaker over a series of quality lapses that have grounded aircraft and upended the operations of numerous carriers.
• American Airlines Group Inc. expects profit this year to beat Wall Street’s estimates as it benefits from strength in demand for international flights and improved operating performance.
• General Motors Co. blamed poor leadership for mishandling its Cruise robotaxi crisis, an admission the company is hoping will help get its cars back on the roads.
• LVMH sales rose at the end of last year as wealthy shoppers treated themselves to the group’s pricey handbags and Champagne, a sign of resilience at the world’s largest luxury conglomerate.

Key events this week:

• Japan Tokyo CPI, Friday
• Bank of Japan issues minutes of policy meeting, Friday
• U.S. personal income/spending, PCE deflator, pending home sales, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.5 per cent as of 4 p.m. New York time
• The Nasdaq 100 rose 0.1 per cent
• The Dow Jones Industrial Average rose 0.6 per cent
• The MSCI World index rose 0.3 per cent

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro fell 0.4 per cent to $1.0839
• The British pound fell 0.2 per cent to $1.2705
• The Japanese yen fell 0.2 per cent to 147.74 per dollar

Cryptocurrencies

• Bitcoin rose 0.3 per cent to $39,891.13
• Ether rose 0.6 per cent to $2,228.35

Bonds

• The yield on 10-year Treasuries declined five basis points to 4.12 per cent
• Germany’s 10-year yield declined five basis points to 2.29 per cent
• Britain’s 10-year yield declined three basis points to 3.98 per cent

Commodities

1. West Texas Intermediate crude rose 2.9 per cent to $77.25 a barrel
2. Spot gold rose 0.3 per cent to $2,019.19 an ounce