US shares soar as Magnificent 7 ride again after sluggish start to year

The market mood in Europe was subdued after ECB chiefs appeared to have some success in reining in market bets the central bank was set to cut interest rates aggressively this year

Investor optimism about the resilience of the US economy and potential accretions from AI has buoyed markets

Fri, 19 Jan, 2024 - 20:20

US shares powered higher as the S&P 500 index was driven by gains in chipmakers and heavyweight technology stocks on optimism around artificial intelligence (AI).

After surging about 24% last year, the S&P 500 had been nearly flat so far in 2024, as investors scaled back bets on how aggressively the US Federal Reserve will cut US interest rates this year.

However, US investors appear to be revisiting the themes of last year when tech shares, and the ‘Magnificent Seven’ in particular, were boosted by the prospects of AI tools driving earnings in the coming years.

Chipmakers, including Nvidia and Advanced Micro Devices, rallied to record highs after the Taiwan Semiconductor Manufacturing survey projected 2024 revenue growth of more than 20% on booming demand for high-end chips used in AI applications.

Shares in Intel, which employs around 5,000 people in Ireland, also rose sharply during the trading session.

Subdued

However, the market mood in Europe, which usually tracks the US, was subdued, after a week when senior European Central Bank chiefs, including president Christine Lagarde, at Davos, appear to have had some success in reining in market bets that the central bank was set to cut interest rates aggressively this year.

Most shares in Dublin ended lower and the pan-European Stoxx index, which tracks the 600 largest companies on stock markets across Europe, slipped by the close.

Still, investor optimism about the resilience of the US economy and potential accretions from AI has buoyed markets. The S&P 500 last set its highest ever closing of 4,796.56 points on January 3, 2022.

The stocks that led the rally in 2023 are again traders’ top picks, according to Bank of America’s Michael Hartnett, who says investors are reverting to owning growth, technology, the “AI bubble”, and the Magnificent Seven.

The group of seven comprises Apple, Amazon, Google-owner Alphabet, Facebook-owner Meta, Microsoft, Nvidia, and Tesla.

However, Tesla shares failed to join in with yesterday’s US rally, and Apple and Amazon were in the headlines over European Commission competition actions.