Stocks Closed Mixed Yesterday, But Nasdaq Leads The Way With Sharp Gains Stocks closed mostly higher yesterday, but off their best levels of the day. And the Dow and the small-cap Russell 2000 shed all of their intraday gains to finish modestly lower by the close. Tech led the way with the Nasdaq gaining 1.24%. Big-tech and AI related stocks continue to enjoy strong demand. And that trend is likely to continue in the new year, and the foreseeable future. If there was any doubt, Microsoft on Friday said they planned on spending $80 billion on the construction of AI datacenters in fiscal 2025, with more than half of that being committed to the U.S. The AI boom is real, and is supported by real earnings, and real growth potential. It's forecast to be just as transformative as the personal computer, the internet and the mobile phone. And it's expected to touch virtually every industry in some way shape or form, as well as impact ordinary lives. And with last year's 23%+ gain in the S&P (second 20%+ gain in row), it's looking like another tech boom is underway. The last time this happened, you have to go all the way back to 1995 and 1996. In 1995 the S&P was up 34.1%. And in 1996 it was up 20.3%. The gains continued from there. In 1997 it was up another 31.0%. In 1998 it was up 26.7%. And in 1999 it was up 19.5%. A spectacular rally that lasted 5 long years. I believe we could possibly see the same thing again now. Maybe 5 years or more of boom times – for similar reasons, and some unique to the present day. The similarity is that, back then, the gains were led by a tech boom driven by the internet and dot-com companies. Today, it's another tech boom, but driven by AI. But the current rally we're seeing in stocks goes beyond just big tech. And that's what makes this rally potentially even more exciting. As the rally broadens out, plenty of other stocks and industries are expected to fuel the rally even further. But there's no overestimating the importance of the AI-inspired tech boom. In other news, yesterday's PMI Composite report showed the Composite Index at 55.4, up from last month's 54.9, but under estimates for 56.6. The Services Index came in at 56.8 vs. last month's 56.1 and views for 58.5. And Factory Orders slipped -0.4% m/m vs. last month's 0.5%, but in line with the consensus for -0.4%. Today we'll get the International Trade in Goods and Services report, the ISM Services Index, and the Job Openings and Labor Turnover Survey report (or JOLTS for short). But the report everybody is really waiting for is Friday's (1/10), Employment Situation report. Given the Fed's dual mandate of price stability (low inflation) and maximum employment, the jobs report is an important piece of data in helping to shape the Fed's monetary policy. Last month's (November) came in well above expectations. But October's came in well below expectations. Granted, October's was skewed due to strikes and two hurricanes, which made gathering data difficult. But November's was skewed as well with bounce-back data from the hurricanes and the end of the strikes. So there's lots of interest in what the December jobs data will show. In the meantime, we have a lot of week left. And the market is already off to a fine start in the new year. Granted, it's only day 3 of 250 trading days in 2025. But a good start is good start. See you tomorrow,  Kevin Matras
Executive Vice President, Zacks Investment Research | 
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