Nasdaq 100 and S&P 500: AI Stocks and Rate Cuts Fuel 2024’s 20% Market Surge

What’s Driving the Market Today

Stocks edged higher on the final trading day of 2024, positioning the S&P 500 for a second consecutive year of over 20% gains. Investor confidence has been fueled by optimism around rate cuts, economic resilience, and the surge in artificial intelligence-related stocks.

Key Facts and Analysis: What Traders Need to Know Right Now

The S&P 500 climbed 0.3% on Tuesday, with the Nasdaq Composite adding 0.2% and the Dow Jones Industrial Average rising 141 points, or 0.3%. This performance adds to an already impressive 24% annual gain for the S&P 500, matching its 2023 performance and marking a two-year rise of approximately 54% – the strongest since 1997-1998. The Nasdaq led the major indexes with a 30% advance for the year, while the Dow posted a 13% increase.

Much of the year’s rally was driven by enthusiasm around artificial intelligence and its anticipated productivity boosts. Market heavyweights such as Nvidia and Apple saw record highs, contributing to the broader market surge. The so-called “Magnificent Seven” stocks continued to dominate, reinforcing bullish sentiment across the technology sector.

The Federal Reserve’s decision to lower its benchmark interest rate by a full percentage point since September bolstered economic optimism, providing additional momentum in the latter half of the year. Investor sentiment further strengthened following November’s election of Donald Trump, with markets responding favorably to the potential for tax cuts and deregulation under the incoming administration. This optimism was particularly evident in the banking sector, where JPMorgan and Goldman Sachs surged by 42% and 49%, respectively. Tesla also posted strong returns, gaining 67% year to date.

Bitcoin mirrored the strength of equity markets, climbing 124% in 2024 and crossing the $100,000 threshold for the first time.

Despite the strong annual performance, December presented challenges as investors took profits from top-performing stocks, contributing to a 4.8% monthly decline in the Dow and a 1.7% drop in the S&P 500. The Nasdaq, however, bucked the trend with a 1.7% gain this month. The S&P 500 also failed to deliver a year-end “Santa Claus rally,” with the index slipping by at least 1% over the last two trading sessions.

Market Forecast: Where Could the Market Be Headed Next?

While the market ended the year on a mixed note, the overall bullish sentiment from AI-driven growth and rate cut expectations remains intact heading into 2025. However, uncertainty surrounding the incoming administration and the potential for profit-taking could lead to volatility in the near term. Traders will likely focus on economic data and Federal Reserve signals as key drivers of momentum in early 2025.

More Information in our Economic Calendar.