'What's encouraging is that the even-weighted S&P is leading,' says Navellier
The U.S. stock market broadened its rally this week, with all S&P 500 sectors booking weekly gains, as investors appeared relieved by interest rates in the bond market reversing some of their recent startling climb.
The S&P 500 SPX, Dow Jones Industrial Average DJIA and Nasdaq Composite COMP booked weekly gains, bringing all three indexes into positive territory for January, according to FactSet data. The S&P 500 and Dow each saw their biggest weekly rally since the week during which Donald Trump won the U.S. presidential election in early November.
"What's encouraging is that the even-weighted S&P is leading," which is a positive sign of the U.S. stock market broadening its climb, said Louis Navellier, chief investment officer of money-management firm Navellier, in an emailed note Friday. "Aiding the recent recovery is the major correction of interest rates."
An exchange-traded fund that tracks an index that equally weights stocks in the S&P 500 saw a bigger weekly gain than the S&P 500, the widely followed U.S. stock benchmark that has a heavy weighting toward Big Tech megacap stocks. After a rocky start to 2025 as Treasury yields jumped, the bull market's breadth is broadening ahead of Donald Trump's inauguration.
The top three sectors in the S&P 500 this week were financials, energy and materials, with each surging around 6%, FactSet data show. The financials sector XX:SP500.40 rallied as major Wall Street banks rolled out their earnings results for the fourth quarter - with Citigroup Inc. (C), Goldman Sachs Group Inc. (GS) and Morgan Stanley (MS) all posting huge weekly rallies of around 12%.
Banks this week have reported strong results for the fourth quarter, said Chris Davis, chairman of Davis Advisors, in a phone interview. Despite their recent rally, the banking industry trades at a "huge discount" to the broader U.S. stock market measured by the S&P 500 index, he said.
Read: Why S&P 500's financials sector just booked its best day since early November
Davis is a portfolio manager for the actively managed Davis Select Financial ETF DFNL, an exchange-traded fund that climbed 6% this week, FactSet data show. He said investors expect the banking industry may benefit from deregulation under the Trump administration. Less "regulatory complexity" would be good for banks, albeit not "radical" deregulation, he said.
Friday marked the last day of trading under U.S. President Joe Biden, with Trump set to be inaugurated on Monday. The U.S. stock and bond markets will be closed Monday in honor of Martin Luther King Jr. Day.
Major U.S. stock indexes closed higher Friday, with the Dow rising 0.8%, the S&P 500 climbing a sharp 1% and the technology-heavy Nasdaq Composite advancing 1.5%. All three indexes rallied this week as Treasury yields retreated in the bond market.
The yield on the 10-year Treasury note BX:TMUBMUSD10Y fell 16.1 basis points this week to 4.610%, the rate's biggest weekly decline since the period ending Nov. 29 based on 3 p.m. Eastern time levels, according to Dow Jones Market Data. Treasury yields saw a big drop on Jan. 15, when a reading on core U.S. inflation in December came in slightly cooler than Wall Street anticipated.
The S&P 500 is now positive territory in January despite its biggest sector, information technology, still being down for the year. Tech XX:SP500.45 rose 1.6% this week but ended Friday down 0.2% so far in January, according to FactSet data.
The S&P 500's 2.9% climb this week left it up 2% in January through Friday, according to FactSet data. The Invesco S&P 500 Equal Weight ETF RSP staged a larger 3.9% rally this week, for a year-to-date gain of 2.7%.
Still, Big Tech stocks, which have an outsize weighting in the S&P 500, mostly climbed this week.
The Roundhill Magnificent Seven ETF MAGS - which equally weights seven closely watched Big Tech stocks including Apple Inc. (AAPL), Microsoft Corp. (MSFT), Google parent Alphabet Inc. (GOOGL) (GOOG), Amazon.com Inc. (AMZN), Nvidia Corp. (NVDA), Tesla Inc. (TSLA) and Facebook parent Meta Platforms Inc. (META) - booked a weekly rise of nearly 2% for a year-to-gain of 1.9%.
The U.S. stock market's rally this week included a 4% jump for small-cap stocks measured by the Russell 2000 index RUT, which is now up slightly more than 2% so far this year through Friday.
Falling rates in the bond market help support the high price-to-earnings multiples in the U.S. stock market, said Navellier, and remove "pressure off the more highly leveraged" small-cap companies.
-Christine Idzelis
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