Tech Earnings Boost US Equities; S&P 500 Extends 8-Week Rally
Wall Street’s bullish momentum shows no signs of fading as stronger-than-expected tech sector earnings and growing optimism around Federal Reserve rate cuts have propelled the S&P 500 to its eighth consecutive weekly gain—its longest winning streak since 2017. The benchmark index closed Friday up 0.7% for the week, bringing its cumulative rise since late October to nearly 15%, driven by megacap tech stocks that have redefined market leadership in 2024.
At the core of the rally lies a string of robust quarterly results from tech giants, which have dispelled lingering concerns about slowing growth amid high interest rates. Apple, the world’s most valuable company, reported fiscal 2024 fourth-quarter revenue of $90.1 billion, topping analysts’ expectations by $2.9 billion. Its services segment—including Apple Music, iCloud, and Apple Pay—grew 16% year-over-year to a record $22.3 billion, offsetting softer iPhone sales in mature markets and highlighting the resilience of its recurring revenue streams. The company’s strong performance in emerging markets like India and Southeast Asia further reassured investors of its long-term growth trajectory.
Microsoft, another pillar of the tech sector, delivered standout results fueled by its artificial intelligence (AI) push. The company’s Azure cloud computing platform posted 29% year-over-year revenue growth, outpacing estimates, as businesses rush to adopt AI tools powered by OpenAI, in which Microsoft holds a significant stake. CEO Satya Nadella emphasized “strong enterprise demand for our AI solutions,” noting that customers are increasingly integrating generative AI into their operations to boost efficiency. This performance has lifted Microsoft’s stock by over 50% this year, making it a key driver of the S&P 500’s gains.
Nvidia, the AI chipmaker at the center of the global tech boom, continued to shatter records with its third-quarter earnings. Revenue surged 206% year-over-year to $22.1 billion, while earnings per share jumped 12-fold to $4.02, far exceeding Wall Street forecasts. The company’s data center segment, which supplies chips for AI training and inference, accounted for 76% of total revenue, underscoring the insatiable demand for AI infrastructure. Nvidia’s success has not only lifted its own stock by more than 240% in 2024 but has also boosted the broader semiconductor sector, with peers like Advanced Micro Devices and Intel posting solid gains on spillover optimism.
Beyond tech earnings, growing expectations of Fed rate cuts have provided additional tailwinds. Recent comments from Fed officials, including Chairman Jerome Powell, suggest that the central bank could begin lowering interest rates as early as March 2025, provided inflation continues to cool toward its 2% target. Lower rates reduce borrowing costs for companies, particularly growth-oriented tech firms whose valuations are highly sensitive to interest rate movements. This shift in monetary policy outlook has attracted investors back to equities, rotating out of safe-haven assets like bonds.
The rally has also shown signs of broadening beyond the “Magnificent Seven” tech stocks—a positive signal for market sustainability. Sectors like consumer discretionary, industrials, and healthcare have joined the upward move in recent weeks, indicating that investor confidence is spreading across the economy. This breadth suggests the market is not relying solely on a handful of tech giants, reducing vulnerability to a potential pullback in any single stock.
However, some analysts caution that valuations are becoming stretched: the S&P 500 now trades at around 21 times forward earnings, above its 10-year average of 18 times. Risks remain, including the possibility that future tech earnings may not live up to sky-high expectations, especially if AI demand slows or competition intensifies. Geopolitical tensions, particularly in the Middle East, could also disrupt global supply chains and dampen investor sentiment.
For now, though, the momentum remains firmly on the bulls’ side. The combination of strong tech fundamentals, AI-driven growth, and dovish Fed policy has created a favorable environment for US equities. As the S&P 500 extends its longest winning streak in seven years, investors are looking ahead to the next round of earnings and Fed meetings to confirm whether the rally can sustain into 2025.
