Don't look now, but stocks may have some momentum
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The recent debt ceiling deal has added to the Goldilocks backdrop for shares.
State of play: The S&P 500 posted its best day in almost a month on Friday, with the blue-chip index rising to a high for the year.
- It's now up roughly 11.5% in 2023, helping to erase some of the sting from last year's 19.4% tumble.
The big picture: The debt ceiling deal's passage through the U.S. Senate was the most proximate cause of Friday's rally. But there's a lot for investors to like at the moment.
- Inflation has been slowing — at least a bit — and the Fed is now widely expected to refrain from another rate hike at its next meeting.
- Companies seem confident about the outlook, with their first-quarter numbers arriving better than expected.
- Analysts are raising their forecasts for profits to come.
- And the giddiness about AI is adding a dash of animal spirits to the mix.
Yes, but: The market's gains have been fairly narrow, with a few giant tech companies accounting for more than the entirety of the upswing in share prices through the end of May. Some argue that makes the S&P vulnerable to a pullback if those powerhouse companies falter.
The bottom line: With the debt ceiling out of the way, the economy looking solid and the Fed potentially ending its recent run of rate hikes, the market could have a little room to run.
