US stocks hit all-time highs as investors shrugged off Donald Trump's tariff plan and geopolitical risks eased after Israel and Hezbollah in Lebanon reached a ceasefire deal.
Stocks extended gains for a seventh straight session, with the S&P 500 hitting its 52nd record this year.
Shortly after oil futures settled, the United States said Israel and the Lebanese militant group had reached a deal. After the market closed, Dell Technologies Inc. reported worse-than-expected sales, while HP Inc. and CrowdStrike Holdings Inc. gave lackluster business outlooks.
Wall Street shrugged off Trump’s plan to impose additional tariffs on major U.S. trading partners. Shares of Microsoft Corp. lifted software companies, as the group’s exposure to tariffs declined. While automakers such as General Motors Co. and Ford Motor Co. were hurt by their exposure to Mexico and China, the decline in stock volatility showed calm prevailed.
Escalate my speech
“We still see the tariffs as a strategic move, and believe that rhetorical escalation will be worse than action,” said Andrew Brenner of NatAlliance Securities.
The S&P 500 rose 0.6%, the Nasdaq 100 gained 0.6%, while the Dow Jones Industrial Average added 0.3%. The 10-year Treasury yield rose 2 basis points to 4.30%, and the dollar index rose 0.2%. The Mexican peso and the Canadian dollar fell.
For Dennis DeBusschere of 22V Research, Trump’s linking of the tariffs to drugs and immigration, rather than trade and economic policy, sent a message to investors that it is a negotiating tactic, not a political tool.
“Trump was delivering on his campaign promises, nothing more, nothing less, and my sense is that investors welcomed the move,” said Kenny Polcari of SlateStone Wealth.
Moderate bond market response
While stocks rose, the bond market's response was muted after its second-biggest advance this year.
At BMO Capital Markets, Ian Lyngen says the muted response in Treasuries may be because the market has already priced in a renewed focus on tariffs as a trade policy, and it is also an acknowledgement that tariff increases have a one-time impact on inflation.
Stocks resumed their rally after last week’s election, and the S&P 500 has since posted modest gains. However, trading volume overall has been relatively thin, both in cash and futures, ahead of the Thanksgiving holiday on Thursday.
The S&P 500 is up more than 25% in 2024, on track for a second year of returns above 20%, a rise that has occurred only four times in the past century.
Deutsche Bank's Bankim Chadha says the benchmark index will hit 7,000 points by the end of next year, making him the most bullish among Wall Street strategists who expect further gains for U.S. stocks.
“We see strong, consistent momentum continuing through 2025, with earnings per share growth in the low double digits,” Chadha and his team wrote in a note dated Monday.
Another year of gains
Meanwhile, Bank of America’s Savita Subramanian is counting on another year of double-digit gains for the S&P 500 in 2025, but says better opportunities exist in individual stocks outside the benchmark.
Subramanian is betting on the index hitting 6,666 by the end of 2025, and recommends companies with healthy cash flow prospects and a strong link to the U.S. economy. The strategy leans toward financial stocks, consumer discretionary, materials, real estate and utilities.
At Goldman Sachs Group Inc., strategists advise investors to keep their money in U.S. stocks, adjusting their holdings to mitigate the fact that nearly half of the S&P 500’s 2024 advance has been driven by the so-called Big Seven (Meta, Tesla, Microsoft, Amazon, Alphabet, Nvidia, Apple).
Goldman’s Peter Oppenheimer says the implementation of diversification across strategies and regions comes from the high concentration and valuation of the US equity market, adding that an overweight in US stocks still makes sense, given the strong economic outlook and earnings forecast for 2025.
