Review of S&P 500 for January 20

US stock market logs strong weekly growth as Trump prepares to take office

On Friday, US major stock indices posted gains: Dow +0.8%, NASDAQ +1.5%, and S&P 500 +1%. The S&P 500 closed at 5,990, trading within the range of 5,700 to 6,100.

The stock market regained momentum on Friday, buoyed by strong performance in mega-cap stocks, optimism about economic growth, and speculative excitement ahead of Donald Trump's inauguration as the 47th President of the United States on Monday.

This excitement extended to cryptocurrencies and related stocks, fueled by a Bloomberg report indicating that Trump plans to issue an executive order making cryptocurrency a priority in national policy. Additional reports suggested that the new president may sign a cascade of executive orders immediately after taking office.

Key developments

President-elect Trump revealed a "very good" phone call with China's President Xi Jinping, discussing trade, fentanyl, and TikTok. Notably, the Supreme Court upheld a TikTok ban set to take effect Sunday, but markets anticipate Trump will pause the ban for 90 days, as he has promised.

Speculation about Elon Musk potentially acquiring TikTok also aroused investors' interest, boosting Tesla's stock (TSLA: $426.50, +$12.68, +3.1%), a key player in the mega-cap rally.

The Vanguard Mega-Cap Growth ETF (MGK) closed up 1.4%, hitting an intraday high of +1.8%.

Mega-cap stocks significantly influenced the consumer discretionary (+1.7%), information technology (+1.7%), and communication services (+1.1%) sectors, which outperformed the broader market. Interestingly, the S&P 500 closed above its 50-day moving average (5,966).

While most sectors in the S&P 500 rose, real estate (-0.04%) and healthcare (-0.7%) lagged. Healthcare faced pressure from weaker pharmaceutical stocks after the Department of Health and Human Services announced 15 additional drugs for Medicare pricing contracts, including Novo Nordisk's Ozempic and Wegovy (NVO: $78.71, -$4.36, -5.3%).

Small- and mid-cap stocks also gained but underperformed mega-caps, which dominated Friday's rally.

Treasury yields and economic calendar

Treasury yields were largely unchanged from Thursday's close, unable to sustain overnight gains despite stronger-than-expected housing starts, building permits, and industrial production data for December.

Economic highlights:

• Housing starts: +15.8% MoM to a seasonally adjusted annual rate of 1.499M units (consensus: 1.318M).
• Building permits: -0.7% MoM to 1.483M (consensus: 1.454M). Single-family permits rose +1.6%, supporting new housing supply.
• Industrial production: +0.9% MoM (consensus: +0.3%), with a capacity utilization rate at 77.6% (consensus: 77.0%).

The key takeaway is that industrial production showed signs of recovery after being suppressed by hurricanes and Boeing strikes in prior months.

Global and geopolitical updates

Brent crude oil closed at $80.50, down approximately $1.50 from last week's highs but holding above $80 per barrel.

In Israel and Gaza, a 42-day truce began over the weekend, with the first hostages, taken by Hamas on October 7, released. This marks progress in the conflict that had spanned for long months.

Market outlook

Optimism surrounding Trump's inauguration could fuel further growth today. Speculation is already driving meme coins linked to Trump to surge. At a Friday rally, Trump stated, "I will end the conflict in Ukraine," and reports indicate he instructed aides to arrange a call with Russian President Vladimir Putin.

On this news, Russian stock markets are up approximately +1% on Monday morning across major indices.

Conclusion

With Trump's inauguration and expected executive orders, market optimism is high, particularly in mega-cap stocks and crypto-related assets. The coming week could see further gains fueled by political and economic expectations.