The promise of artificial intelligence (AI) continues to drive the Nasdaq to new heights, with the tech-heavy index reaching an all-time high on Friday. This surge in mega-cap tech stocks has propelled the Nasdaq up by 1.74% for the week, outperforming the S&P 500, which rose nearly 1%. However, the Dow Jones Industrial Average saw a slight dip of 0.11%.
The current earnings season has been a strong one, with 73% of S&P 500 companies reporting an upside earnings surprise and 64% reporting better-than-expected revenue results. Two portfolio stocks that reported earnings last week, TJX Companies and Salesforce, also exceeded expectations, prompting analysts to raise their price targets.
The Federal Reserve’s preferred inflation gauge, the personal consumption expenditure (PCE) index, showed a rise of 0.4% in January, in line with expectations. This points to further disinflation at both the headline and core levels, which is a positive sign for the central bank’s efforts to combat inflation.
Looking ahead, investors will be closely watching the February nonfarm payrolls report, set to be released on Friday. Economists are expecting 200,000 payroll additions, with annual wage inflation tracking at 4.5%. A number below 4.5% but higher than the January PCE index growth would be ideal, as it would help to keep inflation in check while supporting consumer buying power.
In addition to the jobs report, investors will also be monitoring the January factory orders report and the February ISM Services PMI report on Tuesday, as well as earnings reports from companies like Foot Locker, Costco, and Broadcom later in the week. These reports will provide further insight into the health of the economy and the outlook for key sectors.
Overall, the continued strength of mega-cap tech stocks driven by the promise of AI, coupled with positive economic data and strong earnings reports, bodes well for the market as it heads into the coming week.
