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Another Wall Street milestone is within grasp as the S&P 500 (SP500) continues to charge higher, powered by a robust earnings season. Corporate profits and upbeat guidance are showing healthy spending patterns among consumers and businesses alike, while AI momentum appears to justify the massive valuations seen in the tech sector. Coming up... The benchmark S&P 500 Index is a whisker away from the 5,000 milestone after closing at 4,995 on Wednesday and climbing as high as 4,999.89 during the session.

Bigger picture: Despite Fed Chair Jay Powell ruling out a rate cut in March, it's clearly the end of a rate-hiking cycle, unless some incoming economic data throws a curveball at the central bank. Traders continue to celebrate that in style, especially if holding off on policy easing guarantees a significantly softer landing for the U.S. economy. The latest figures have also continued to boost sentiment, with GDP growth expanding at a 3.3% clip in Q4 and another 353K jobs added in January, highlighting the strength of the macro story.

"The question for bulls is whether this market continues to be propelled upward by a handful of mega-cap tech names or the rally broadens, and the average stock leads us higher, while the Magnificent 7 tread water from here," notes Lawrence Fuller, Investing Group Leader of The Portfolio Architect. "There should be plenty of opportunities between now and March to position for the next leg up in this bull market."

By the numbers: Only a month into the new year, the S&P 500 (SP500) is up 4.7%, which is more than halfway towards the 9% average annual return seen over the past two decades. Some FOMO may also be taking place among investors who missed out on the big rally last year when the benchmark index soared more than 24%. Top heaviness could be a concern given that the five largest stocks - Alphabet (GOOG) (GOOGL), Amazon (AMZN), Apple (AAPL), Microsoft (MSFT) and Nvidia (NVDA) - account for 27% of the S&P 500, but that has been going on for some time and hasn't stopped the index from hitting the 3,000 level in 2019 and 4,000 only two years later.

The magic returns

Disney (DIS) gained 6.7% to $105.79/share AH on Wednesday after posting earnings that landed on the high side of expectations and offered upbeat guidance as ongoing cost cuts pay off. Meanwhile, Disney+ core subscribers shrank by 1.3M sequentially - an unsurprising result given price hikes on the service. Besides headlines surrounding Fortnite maker Epic Games and Taylor Swift, CEO Bob Iger said the renewed strength of all businesses (from sports and entertainment to experiences) sets the stage to boost shareholder returns. The media giant also raised its semi-annual dividend by 50% and announced it would start buying back shares for the first time since fiscal 2018. (40 comments)

Treasury time

Signaling strong investor demand despite the auction's large size, the U.S. government on Wednesday sold a record $42B of 10-year notes at lower-than-expected yields than the past six auctions. The Treasury's quarterly debt refunding will be completed later today with the auction of $25B of 30-year bonds, which analysts believe is the bigger test, as it's longer in interest rate risk. SA analyst Crystal Allen feels bond investors will be motivated to take advantage of the current higher rates "if Wall Street is convinced that rates will soon go down." See how Treasury yields have done across the curve at the Seeking Alpha bond page. (4 comments)

Made in Mexico

Amid diversification efforts and growing trade tensions, Mexico overtook China to be the top source of goods imported by the U.S. in 2023 for the first time in more than two decades. Imports from Mexico increased $20.8B Y/Y to $475.6B last year, while Chinese imports decreased $109.1B to $427.2B, according to the U.S. Census Bureau. Economists said the data is a clear indication of the impact of escalating trade disputes between Washington and Beijing. "We're decoupling, and that's weighing heavily on trade flows," said Mark Zandi, chief economist at Moody's Analytics. (5 comments)

Today's Markets

In Asia, Japan +2.1%. Hong Kong -1.3%. China +1.3%. India -1%.
In Europe, at midday, London -0.1%. Paris +0.5%. Frankfurt +0.2%.
Futures at 7:00, Dow -0.1%. S&P -0.2%. Nasdaq -0.2%. Crude +1% to $74.57. Gold -0.4% to $2,043.50. Bitcoin +4.3% to $44,718.
Ten-year Treasury Yield +2 bps to 4.13%.

Today's Economic Calendar

8:30 Initial Jobless Claims
8:30 Fed's Barkin Speech
10:00 Wholesale Inventories (Preliminary)
10:30 EIA Natural Gas Inventory
11:30 Fed's Barkin Speech
1:00 PM Results of $25B, 30-Year Bond Auction
4:30 PM Fed Balance Sheet

Companies reporting earnings today »

What else is happening...

Arm Holdings (ARM) surges after raising full-year profit guidance.

PayPal (PYPL) slides as active accounts slip, outlook disappoints.

NYCB (NYCB) in talks to shed residential mortgage risk, sell RV loans.

China's top securities regulator replaced amid stock market rout.

More China worries... Retail inflation drops to more than 14-year low.

Uber (UBER) tops gross booking estimates amid record engagement.

Cost cuts: Some Tesla (TSLA) employees may be on the firing line.

CVS Health (CVS) in charts: Q4 revenue rises across all segments.

AMD (AMD) continues to take CPU market share from Intel (INTC).

Bill Ackman's Pershing Square files to launch new closed-end fund.

More on today's WSB topics

Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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