The US stock market has been on a bullish run in the past few weeks, reaching new record highs amid signs of economic recovery and vaccine optimism. The Dow Jones Industrial Average, the Nasdaq Composite, and the S&P 500 have all surpassed their previous peaks, boosted by strong corporate earnings, consumer spending, and job growth.

US Stock Market

Dow Jones Breaks 36,000 for the First Time

The Dow Jones Industrial Average, which tracks 30 blue-chip companies, broke the 36,000 mark for the first time on Monday, November 27, 2023, closing at 36,015.17, up 0.16% from the previous session. The index has gained more than 20% year-to-date, outperforming its peers in other major markets.

The Dow Jones was led by gains in technology, health care and consumer discretionary sectors, which benefited from the reopening of the economy and the rollout of COVID-19 vaccines. Some of the top performers in the index were Microsoft, which hit an all-time high of $380.34, Intel, which rose 1.30% to $44.53, and 3M, which added 1.02% to $96.93.

Nasdaq and S&P 500 Also Reach New Milestones

The Nasdaq Composite, which tracks more than 3,000 technology and growth-oriented companies, also reached a new milestone on Monday, closing above 14,000 for the first time. The index ended the day at 14,293.29, up 0.30% from the previous session. The index has gained more than 37% year-to-date, outpacing the Dow Jones and the S&P 500.

The Nasdaq was driven by strong performances in the biotechnology, e-commerce and cloud computing sectors, which have thrived during the pandemic and the digital transformation. Some of the top performers in the index were Salesforce.com, which jumped 0.72% to $226.00, Amgen, which fell 1.27% to $262.08, and Visa, which slipped 0.17% to $253.87.

The S&P 500, which tracks 500 large-cap US companies, also reached a new record high on Monday, closing at 4,560.84, up 0.03% from the previous session. The index has gained more than 26% year-to-date, reflecting the broad-based recovery of the US economy. The S&P 500 was supported by gains in the energy, materials and utilities sectors, which have benefited from the rising demand and prices of commodities. Some of the top performers in the index were Chevron, which dropped 1.19% to $143.18, JPMorgan Chase, which edged up 0.43% to $152.84, and UnitedHealth, which declined 0.83% to $542.58.

What is Driving the US Market Rally?

The US stock market rally has been fueled by several factors, including:

The rapid vaccination campaign in the US, which has inoculated more than 70% of the adult population and reduced the impact of the COVID-19 pandemic. The vaccines have also boosted consumer confidence and spending, which account for about 70% of the US GDP.
The massive fiscal stimulus from the US government, which has injected more than $5 trillion into the economy since the onset of the pandemic. The stimulus has supported millions of households and businesses, as well as infrastructure and social programs. The US Congress is currently debating another $1.75 trillion spending package, which could provide further boost to the economy.
The accommodative monetary policy from the US Federal Reserve, which has kept interest rates near zero and expanded its balance sheet to more than $8 trillion. The Fed has also signaled that it will not raise rates until 2024, and that it will taper its bond-buying program gradually and cautiously. The Fed’s actions have lowered the cost of borrowing and increased the liquidity and attractiveness of the stock market.
The robust corporate earnings from the US companies, which have exceeded analysts’ expectations in the third quarter of 2023. According to FactSet, the blended earnings growth rate for the S&P 500 companies was 36.9%, the highest since the fourth quarter of 2009. The earnings growth was driven by the recovery of the sectors that were hit hard by the pandemic, such as energy, industrials and consumer discretionary.

What are the Risks and Challenges Facing the US Market?

Despite the strong performance of the US stock market, there are also some risks and challenges that could derail the rally, such as:

The emergence of new variants of the COVID-19 virus, which could pose a threat to the effectiveness of the vaccines and the reopening of the economy. The US is currently facing a surge in cases and hospitalizations due to the Delta variant, which is more contagious and severe than the original strain. The US is also monitoring the Omicron variant, which was first detected in South Africa and has been classified as a variant of concern by the World Health Organization.
The inflationary pressures in the US economy, which have reached the highest level since 1990. The consumer price index rose 6.2% year-over-year in October, well above the Fed’s target of 2%. The inflation has been driven by the supply chain disruptions, the labor shortages, the rising demand and the base effects from the pandemic. The inflation has eroded the purchasing power of the consumers and the profits of the companies, and could force the Fed to tighten its monetary policy sooner than expected.
The geopolitical tensions and trade conflicts between the US and its rivals, such as China, Russia and Iran. The US has imposed sanctions and tariffs on these countries, accusing them of human rights violations, cyberattacks and nuclear ambitions. These countries have retaliated with their own measures, creating uncertainties and frictions in the global markets. The US is also facing challenges from its allies, such as the European Union, which has imposed a digital tax on the US tech giants and threatened to impose carbon tariffs on the US exports.