(Bloomberg) — Stocks are advancing to post their best week since the November presidential election just ahead of Donald Trump’s inauguration.
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Most groups in the S&P 500 rose, with a 1% gain on Friday. Nvidia Corp. and Tesla Inc. led the gains in megacaps, while Intel Corp. jumped more than 9% after reports that the chipmaker is an acquisition target. Also helping sentiment were headlines that Trump and Chinese President Xi Jinping discussed trade, TikTok and fentanyl, which could set the tone for relations between the world’s two largest economies. Bonds also rallied this week, with 10-year yields down about 15 basis points over the range.
Trump, who is scheduled to be sworn in as America’s 47th president on Monday, reiterated his focus on core priorities such as tax cuts and tariff increases. Stocks soared after the election on bets that the new administration would enact pro-growth policies that would boost corporate America. While stocks fell last month on dour signals from the Fed, recent data showing cooling inflation has rekindled bets on a rate cut.
“This week’s data on declining inflation and a positive reaction to the earnings of several financial companies resulted in gains in bonds and stocks,” said Craig Johnson of Piper Sandler. “Recent short-term oversold conditions and weak bullish sentiment are supporting major indices’ recovery within their primary uptrends.”
For Nationwide’s Mark Hackett, the rally in the stock is encouraging, indicating that the balance between bulls and bears is evening out.
“Markets are likely to remain in a zig-zag pattern throughout the earnings season,” he noted. “When the earnings season ends, expectations are reversed and the buying window reopens, the bulls can reassert control.”
The S&P 500 extended its weekly advance to 2.9%. The Nasdaq 100 rose 1.7% on Friday. The Dow Jones Industrial Average added 0.8 percent. The “Seven Magnificent” megacap gauge strengthened by 1.8%. The Russell 2000 advanced 0.4%. Buoyed by solid earnings, banks continued to rally, with the closely watched industry measure up 8.2% on the week. US markets will be closed on Monday for the holiday.
The yield on the 10-year Treasury bond was little changed at 4.61%. Bloomberg’s dollar spot index rose 0.3%. Bitcoin jumped to around $105,000.
“What a difference a week makes,” said Steve Sosnick of Interactive Brokers. “At this time last Friday, stocks were selling off sharply on a better-than-expected jobs report. It revealed the seemingly obvious tendency of the stock market to cut rates against a solid economy.”
From a technical perspective, Janney Montgomery Scott’s Dan Wantrobski says the setup was “almost perfect for oversold conditions to collide with positive news and fuel the rally we’re currently experiencing.”
When Trump is sworn in as the next US president on Monday, stock investors will have one big reason to breathe a sigh of relief. History shows that the performance of the stock benchmark over a three-month period usually improves after Inauguration Day.
History shows that the average three-month performance of the S&P 500 entering the ceremony is only about 1%, compared with a 3.7% gain at the exit, according to a Jefferies analysis of data dating back to 1929.
The index “typically trades erratically around inaugurations,” the firm’s strategists said, but things start to pick up after a few months. In fact, on average the S&P gains 8.3% six months after an inauguration and about 9.5% 12 months after, according to Jefferies.
Trump’s return to the White House is likely to protect U.S. stocks from a major selloff, according to Bank of America Corp. strategists, as investors focus on his protectionist agenda and proposals for lower corporate taxes.
U.S. stocks are being “protected by Trump” from the downside, strategist Michael Hartnett wrote in a note, though he too doesn’t expect sharp gains because of risks including high concentration in mega-cap tech stocks, valuations and investor positioning.
“We continue to view U.S. stocks as attractive, forecasting that 9% earnings growth this year will push the S&P 500 to 6,600 by the end of the year,” said Mark Haefele of UBS Global Wealth Management. “Large-caps should outperform mid-caps and small-caps given their greater exposure to AI, better earnings trends and less dependence on Fed rate cuts.
Sector-wise, he likes information technology, financials, utilities, communications services and consumer discretionary.
“When you’ve had so many years that you should significantly outperform US stocks, it’s very difficult then to look at opportunities outside the US and think there’s going to be anything more attractive,” said Zehrid Osmani of Martin Currie Investment Management. “But valuation discipline must be an important angle for investors. Right now, we should see earnings momentum spread.”
Corporate features:
Microsoft’s $13 billion investment in OpenAI is raising concerns that the tech giant could extend its cloud computing dominance into the emerging artificial intelligence market, the Federal Trade Commission said in a report released Friday.
The Supreme Court unanimously upheld a law that threatens to shut down the wildly popular social media platform TikTok in the US on Sunday, ruling that free speech rights must yield to concerns that Chinese control of the app poses a national security risk.
US auto safety regulators are investigating General Motors Co. over concerns that more than 870,000 of its full-size pickup trucks and SUVs face the risk of engine failure.
Applied Materials Inc. and Lam Research Corp. were raised to overweight to sector weight at KeyBanc Capital Markets as the broker shifts semicap coverage toward immediate growth drivers.
JB Hunt Transport Services Inc. reported fourth-quarter earnings below expectations and warned of first-quarter results as well as cost pressures in 2025.
JetBlue Airways Corp. and Southwest Airlines Co. were downgraded from neutral to underperform at Bank of America Corp., which cited their lower exposure to corporate, premium and international routes.
Novo Nordisk A/S’s blockbuster drug Wegovy was targeted for price cuts by the US government and suffered a setback in a new trial, adding to threats to the Danish company’s early dominance in the growing market for new weight-loss treatments.
Bumble Inc. founder Whitney Wolfe Herd will return to the dating app company as CEO, a year after handing over the reins to Slack Technologies Inc.’s CEO.
Some of the main moves in the markets:
Shares
The S&P 500 was up 1% as of 4 p.m. New York time
The Nasdaq 100 rose 1.7 percent
Dow Jones Industrial Average rose 0.8%
The world index MSCI rose 0.8 percent
The Bloomberg Magnificent 7 Total Return Index rose 1.8%
The Russell 2000 index rose 0.4 percent
Currencies
Bloomberg’s dollar spot index rose 0.3%
The euro fell 0.3 percent to $1.0275
The British pound fell 0.6% to $1.2170
The Japanese yen fell 0.6% to 156.15 per dollar
Cryptocurrencies
Bitcoin rose 4.9% to $105,064.59
Ether rose 5.9% to $3,514.99
Bonds
The yield on the 10-year Treasury bond was little changed at 4.61%
German 10-year yield fell one basis point to 2.54%
Britain’s 10-year yield fell two basis points to 4.66%
Goods
West Texas Intermediate crude fell 0.9% to $77.95 a barrel
Spot gold fell 0.5% to $2,701.21 an ounce
This story was produced with the help of Bloomberg Automation.
— With assistance from Isabelle Lee, Sujata Rao, Margarita Kirakosian and John Viljoen.
