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Last Thursday, the S&P 500 Index notched a fresh new all-time high, thoroughly shaking off a brief bout of selling that plagued stocks to start the new year. Initially, US equities reacted poorly to new PPI data, causing a sell-off below the 50-day moving average and price support.
However, as has been the case over the past couple of years, the correction ended up being nothing more than a bear trap, with investors yet again benefitting from the latest buy-the-dip opportunity. After a frozen rope rally where the S&P 500 has been higher in seven of eight sessions, here's where we stand now.
1. Technical View: Price has rallied straight up from the bottom into a resistance zone. Meanwhile, there are some open price gaps below that could want to be filled. Overall, the bulls are in control but some digestion at these levels would make sense.
2. Sentiment Shift: As measured by the CNN Fear & Greed Index, sentiment has jumped from "Extreme Fear" levels to "Neutral." While investors are not overly bullish, they are no longer excessively fearful. Investors should watch to see if the "one foot out the door" mentality continues on shallow pullbacks and sentiment sinks (this would be a bullish contrarian signal).
3. Seasonality: Though historical post-election seasonal patterns are usually bullish, February tends to be a treacherous period for most. Could we finally get a much-needed pullback next month?
4. AI Spending Remains Robust: Last week, Microsoft CEO Satya Nadella said that he is "good for $80 billion" in AI spending for the "Stargate" project, which includes companies like Nvidia. Meanwhile, Meta Platforms CEO Mark Zuckerberg announced that he is spending $65 billion in CAPEX in 2025 toward AI. Clearly, AI spending is not slowing down any time soon, and if anything, it's ramping. The AI spending will ramp up in other areas, such as data center and data center energy.
5. Animal Spirits are Alive and Well: AI is not the only risk-on market area exhibiting strength.Quantum computing stocks like Rigetti bounced viciously this week, while robotics stocks like Serve Robotics heated up.
Bottom Line
The current market outlook leans bullish, especially over the long-term. However, like is always the case, investors should avoid chasing all-time highs and the "fear of missing out" and instead wait patiently for high probability pullback set ups to emerge within the uptrend.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.
Today you can access their live picks without cost or obligation.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
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Zacks Investment Ideas feature highlights: Microsoft, Nvidia, Meta Platforms, Rigetti and Serve Robotics
For Immediate Release
Chicago, IL – January 27, 2025– Today, Zacks Investment Ideas feature highlights Microsoft (MSFT - Free Report) , Nvidia (NVDA - Free Report) , Meta Platforms (META - Free Report) , Rigetti (RGTI - Free Report) and Serve Robotics (SERV - Free Report) .
S&P 500 Reaches New Highs Amid AI Spending Surges
Last Thursday, the S&P 500 Index notched a fresh new all-time high, thoroughly shaking off a brief bout of selling that plagued stocks to start the new year. Initially, US equities reacted poorly to new PPI data, causing a sell-off below the 50-day moving average and price support.
However, as has been the case over the past couple of years, the correction ended up being nothing more than a bear trap, with investors yet again benefitting from the latest buy-the-dip opportunity. After a frozen rope rally where the S&P 500 has been higher in seven of eight sessions, here's where we stand now.
1. Technical View: Price has rallied straight up from the bottom into a resistance zone. Meanwhile, there are some open price gaps below that could want to be filled. Overall, the bulls are in control but some digestion at these levels would make sense.
2. Sentiment Shift: As measured by the CNN Fear & Greed Index, sentiment has jumped from "Extreme Fear" levels to "Neutral." While investors are not overly bullish, they are no longer excessively fearful. Investors should watch to see if the "one foot out the door" mentality continues on shallow pullbacks and sentiment sinks (this would be a bullish contrarian signal).
3. Seasonality: Though historical post-election seasonal patterns are usually bullish, February tends to be a treacherous period for most. Could we finally get a much-needed pullback next month?
4. AI Spending Remains Robust: Last week, Microsoft CEO Satya Nadella said that he is "good for $80 billion" in AI spending for the "Stargate" project, which includes companies like Nvidia. Meanwhile, Meta Platforms CEO Mark Zuckerberg announced that he is spending $65 billion in CAPEX in 2025 toward AI. Clearly, AI spending is not slowing down any time soon, and if anything, it's ramping. The AI spending will ramp up in other areas, such as data center and data center energy.
5. Animal Spirits are Alive and Well: AI is not the only risk-on market area exhibiting strength.Quantum computing stocks like Rigetti bounced viciously this week, while robotics stocks like Serve Robotics heated up.
Bottom Line
The current market outlook leans bullish, especially over the long-term. However, like is always the case, investors should avoid chasing all-time highs and the "fear of missing out" and instead wait patiently for high probability pullback set ups to emerge within the uptrend.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.
Today you can access their live picks without cost or obligation.
See Stocks Free >>
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Zacks Investment Research
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.