The relentless rally in stocks powered ahead on optimism the Federal Reserve will be able to engineer a soft landing, which would bolster the outlook for corporate earnings.

A fresh bout of risk-taking drove the S&P 500 to its 20th record this year, led by gains in industrials and banks. Not even losses in a pair of megacaps — Apple Inc. and Alphabet Inc. — curbed the market momentum. The Nasdaq 100 also hit an all-time high, buoyed by Micron Technology Inc.’s outlook. Reddit Inc. soared in its debut.

The latest round of housing, manufacturing and labor-market data pointed to a resilient economy that, in theory, would scare policymakers trying to bring inflation back to target. A day after the Fed signaled it’s on track to cut rates this year, traders decided to keep looking at the glass half full.

“For now, the soft-landing thesis is intact, with leading indicators showing nascent signs of trending more positively,” said Jim Baird at Plante Moran Financial Advisors.

The S&P 500 topped 5,240. Small caps extended this week’s gains. Treasury 10-year yields were little changed at 4.27 per cent. 

Across the Atlantic, the British pound fell after a pair of Bank of England’s hawks dropped their push for hikes. And a surprise decision from the Swiss National Bank to cut rates also pushed the Swiss franc lower.

To Max Kettner at HSBC, it should not be surprising that risk assets continue to be on a tear.

“The rate-hike cycle of 2022 and 2023 has done little to impact the broader U.S. economy negatively,” he noted.

As for the future trajectory of the Fed, he says it’s a binary question.

“Either they cut or they don’t,” he noted. With Fed Chair Jerome Powell making it it fairly clear that the next move will be down, “it seems more a question of ‘when’ rather than ‘if.’ That seems to be good enough for risk assets.”

Looking at previous periods when the Fed was on hold, the current pause ranks second in terms of duration, according to an analysis from Ryan Grabinski at Strategas Securities, through March 20.

“The good news is that the longer they hold, the more the market has historically moved higher,” he noted.

In periods where the pause is greater than 100 days, the market is up on average 13 per cent, Grabinski said. The best performance occurred during the 2006-2007 pause — which was also the longest and resulted in the S&P 500 rising 22 per cent.

The equity rally has also left forecasters scrambling to lift their end-2024 targets for the S&P 500 just three months into the year. The gauge is already trading above the average estimate of strategists tracked by Bloomberg.

There’s no stopping to the rally in U.S. stocks against a backdrop of improving outlook for corporate earnings and the frenzy around artificial intelligence, according to Societe Generale SA strategists.

The team led by Manish Kabra boosted its year-end target for the benchmark gauge to 5,500 from 4,750 — the highest forecast among strategists tracked by Bloomberg.

“U.S. exceptionalism is going from strength to strength,” Kabra wrote. “Despite widespread market optimism, we view this as rational rather than excessive.”

The latest report from GMO Asset Allocation’s team shows the firm’s continued optimism despite the fact that equity indexes are sitting at all-time highs.

“We are extremely excited about the investing landscape,” it said. “An abundance of cheap assets underpins this enthusiasm from an absolute return standpoint, while appealing valuation spreads within asset classes present us with the best relative asset allocation opportunity we’ve seen in 35 years.”

Meantime, rally-chasing investors who rode U.S. equities higher this year have flocked to an upward trend occurring outside of just the so-called Magnificent Seven that have dominated the market: the one taking place in quality stocks.

As traders have been enamored by artificial intelligence, they’ve also piled into stocks of companies across the broader market with high profitability and strong fundamentals, according to Piper Sandler & Co.’s Michael Kantrowitz.

“AI is a subset of what’s driving momentum, but the rest is good old quality fundamental,” Kantrowitz said.

With the stock market making new records, the odds are quickly rising that the “critical juncture” that we’ve been harping on will resolve itself with more upside movement, said Matt Maley at Miller Tabak + Co.

“We still believe that a short-term pullback could take place at any time,” Maley said. “However, if it doesn’t come quickly and sharply — the odds that it will become a full-blown correction will drop.”

Corporate Highlights:

The U.S. Justice Department and 16 attorneys general sued Apple Inc., accusing the iPhone maker of violating antitrust laws by blocking rivals from accessing hardware and software features on its popular devices.
Apple Inc. and Alphabet Inc.’s Google are set to face full-blown European Union investigations into their compliance with a new law reining in the power of Big Tech, paving the way for potentially hefty fines.
Boeing Co. directors plan to meet with top executives from some of their largest airline customers, who are growing increasingly frustrated about the planemaker’s crisis tearing into their business.
Nelson Peltz received the backing of an influential shareholder advisory firm and a group of business leaders in his bid to join the board of entertainment company Walt Disney Co.
Darden Restaurants Inc. is seeing lower-income consumers pull back, Chief Executive Officer Rick Cardenas said, depriving some of the company’s major brands a key revenue stream.
Gildan Activewear Inc.’s largest investor said the clothing maker’s shares are undervalued, signaling that potential acquirers circling the company may need to pay up to win shareholders’ support.

Key events this week:

Japan CPI, Friday
Germany IFO business climate, Friday
Atlanta Fed President Raphael Bostic speaks, Friday
ECB’s Robert Holzmann and Philip Lane speak, Friday

Some of the main moves in markets:

Stocks

The S&P 500 rose 0.3 per cent as of 4 p.m. New York time
The Nasdaq 100 rose 0.4 per cent
The Dow Jones Industrial Average rose 0.7 per cent
The MSCI World index rose 0.6 per cent

Currencies

The Bloomberg Dollar Spot Index rose 0.4 per cent
The euro fell 0.6 per cent to US$1.0857
The British pound fell 1 per cent to $1.2651
The Japanese yen fell 0.3 per cent to 151.68 per dollar

Cryptocurrencies

Bitcoin fell 2.9 per cent to $65,115.12
Ether fell 0.7 per cent to $3,437.56

Bonds

The yield on 10-year Treasuries was little changed at 4.27 per cent
Germany’s 10-year yield declined three basis points to 2.41 per cent
Britain’s 10-year yield declined two basis points to 4.00 per cent

Commodities

West Texas Intermediate crude fell 0.3 per cent to $81.04 a barrel
Spot gold fell 0.2 per cent to $2,181.34 an ounce