LONDON – Stocks moved higher in the US and Europe on Jan 22, with both the Dow and the S&P 500 building on record gains seen ahead of the weekend on growing optimism for the American economy.
Expectations that the Federal Reserve will not be cutting rates as soon as many investors hoped failed to dent the upbeat mood ahead of a heavy week of US corporate earnings.
Investors will also see on Jan 25 data on fourth-quarter growth in the United States, which could offer clues on when the Fed might start ease rates.
“Optimism is back, more and more investors think the downward trend for stocks is over,” said Mr Pierre Veyret, an analyst at ActivTrades.
Technology stocks drove a US market rally on Jan 19 that saw the Dow and S&P 500 index reach an all-time high, and this week will see results from Netflix and Tesla among the wave of heavyweights reporting.
The Dow rose above 38,000 points for the first time on Jan 22.
Wall Street’s rally on Jan 19 was helped by a closely watched survey from the University of Michigan showing a surge in consumer confidence and optimism about falling inflation.
“Investors appear unperturbed by the prospect of an avalanche of earnings heading their way,” said Mr Chris Beauchamp, chief market analyst at the trading platform IG.
“Stocks have once again defied the doubters by moving higher, after their brief outbreak of worry about the path of interest rates in the US and elsewhere,” he said.
While the European Central Bank is unlikely to cut rates at its policy meeting on Jan 25, all eyes will be on its president Christine Lagarde after she said last week that rate cuts could be coming this summer.
In the US, a string of data in recent weeks has shown inflation remains sticky and well above the bank’s two per cent target, while the jobs market continues to show resilience despite borrowing costs sitting at two-decade highs.
Minutes from the Fed’s most recent meeting also showed decision-makers were happy to keep monetary policy tight until they are confident prices are under control.
On Jan 19, San Francisco Fed boss Mary Daly said it was likely too early to think of moving just yet, while Atlanta Fed chief Raphael Bostic said on Jan 18 that he did not expect a policy tweak until the third quarter.
The chances of a reduction before the end of the first quarter fell last week to less than 50 per cent, having been above 80 per cent the week before, Bloomberg News reported.