The U.S. stock market continued its strong upward momentum on Monday, with the S&P 500 and Dow Jones Industrial Average reaching new all-time highs. According to DataTrek Research, the S&P 500 could hit 6,000 by 2024, a target that now seems realistic after the Federal Reserve began cutting interest rates.
The S&P 500 closed at 5,718.57, setting a fresh record, while the Dow also reached a new peak. Nicholas Colas, co-founder of DataTrek, noted that growth in the S&P 500 isn’t just being driven by technology and artificial intelligence. “Multiple sectors are contributing to earnings growth,” he said.
Wall Street analysts forecast S&P 500 earnings per share to grow by 15.2% next year, up from 10% this year, with the biggest growth expected in cyclical sectors like energy, materials, and industrials. DataTrek projects earnings will rise to $258 per share over the next four quarters, a 12% increase from the previous year.
With the Federal Reserve now easing interest rates, and the economy still growing, Colas sees the path of least resistance for stocks as higher. The S&P 500 is trading at 22.1 times forward earnings, higher than its five-year average of 19.5 but still below the 2020 peak of 23.2. Colas believes 6,000 is an “optimistic but achievable” target based on current earnings expectations.
Stocks Rise After Fed’s Rate Cut
The S&P 500’s new high comes after the Federal Reserve initiated a rate cut of half a percentage point last week, marking the start of its easing cycle. John Madziyire, head of U.S. Treasuries at Vanguard, said the probability of a “soft landing” for the U.S. economy has increased, as inflation cools under tighter monetary policy. He expects the Fed to lower its benchmark rate toward a neutral level of around 3%, down from the current target range of 4.75% to 5%.
On Monday, the 10-year Treasury yield finished at 3.74%, while the two-year Treasury closed at 3.576%. Colas emphasized that reaching 6,000 for the S&P 500 is “hardly a stretch” given rising earnings and lower interest rates, representing just a 5.2% increase from last Friday’s close.
The broader market also gained Monday, with the S&P 500 rising 0.3%, and both the Nasdaq Composite and Dow Jones Industrial Average up 0.1%.
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