Futures for the S&P 500 Remain Steady After the Index Reaches 5,000 for the First Time

In the early stages of Monday, U.S. stocks maintained their position following the S&P 500's recent achievement of closing above the significant 5,000 milestone at the close of the previous week, marking its 10th record finish for 2024.

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Here's a snapshot of the key indices and their movements:

• The Dow Jones Industrial Average (DJIA) edged up by 29 points, or 0.1%, reaching 38,700.
• The S&P 500 (SPX) saw a modest increase of 2 points, less than 0.1%, landing at 5,028.
• The Nasdaq Composite (COMP) advanced by 16 points, or 0.1%, reaching 16,007.

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Last week, the S&P 500 exhibited a 1.4% rise, culminating in its historic breach of the 5,000 threshold. Meanwhile, the Dow recorded a marginal weekly gain of less than 0.1%, and the Nasdaq surged by 2.3%, concluding Friday just 0.4% below its previous record close of 16,057.44 from November 19, 2021.

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The momentum and expansiveness of the recent stock-market rally, characterized by the S&P 500's impressive 7% surge over a five-week period, are generating apprehension among some traders. Chris Larkin, managing director for trading and investing at E-Trade from Morgan Stanley, emphasized the potential tension between the market rally's extension and the buzz surrounding the S&P 500 surpassing the 5,000 mark. Larkin noted historical trends, highlighting that after significant rallies of at least 20% over a 70-trading-day span, the S&P tended to be lower two weeks later more often than not.

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As the market navigates these dynamics, focus has shifted to this week's inflation numbers, with Tuesday's release of the consumer-price-index (CPI) data looming large. Analysts at Jefferies underscored the resilience of fundamentals in propelling the rally, noting that 76% of companies have surpassed bottom-line estimates during the ongoing fourth-quarter earnings season. Andrew Greenbaum, senior vice president of equity product management at Jefferies, highlighted the importance of earnings revisions in gauging stock direction, emphasizing that fundamentals are a primary driver sustaining the rally initiated late last year.

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The potential disruptor to these fundamentals comes in the form of Tuesday's CPI data. Tim Duy, chief U.S. economist at SGH Macro Advisors, pointed out the Federal Reserve's reliance on rate cuts to counterbalance anticipated financial tightening due to returning inflation. However, the timing and magnitude of these rate cuts remain uncertain given the robust state of the economy and lingering questions about the inflation trajectory.

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In summary, while the stock market continues to exhibit strength and resilience, traders are carefully monitoring the potential impact of inflation data and considering historical patterns in the wake of substantial market rallies. The delicate balance between market enthusiasm and caution is palpable, adding an extra layer of complexity to the current landscape.

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