Marketmind: 5,000 reasons for optimism

A look at the day ahead in U.S. and global markets by Amanda Cooper.

The S&P 500 has finally broken the magic 5,000-level and just as the fourth-quarter results season winds down.

The fairly hefty push-back, not just from the Federal Reserve but from central bankers globally in the past few weeks, against the optimistic pricing markets had placed on rate cuts has barely made a dent.

Much of the recent frenzy has been driven by those megacaps with greater exposure to artificial intelligence. But earnings are juicing the rally. LSEG data now shows S&P 500 firms expect earnings to rise by 9.7% this year.

Of the 332 companies in the S&P 500 that have reported earnings to date for 23Q4, 80.7% have reported above analyst expectations. This compares to a long-term average of 66, according to LSEG figures.

Goldman Sachs says that last week, 10 out of 11 sectors were net bought - with consumer staples being the exception - led by cyclical sectors which the bank says collectively saw the largest notional net buying since Sep 2021.

Meanwhile, business appears to be booming and not just in tech-heavy Silicon Valley, but in the seemingly old-tech Permian basin too. Diamondback Energy has said it will buy Endeavor Energy Partners, the region's largest privately held oil and gas producer, in a $26 billion mega deal.

The merger will create the Permian's third-largest producer, behind Exxon and Chevron, as part of a wave of consolidation among U.S. drillers to boost output.

Markets have been more muted over the course of the day so far, given that a number of major Asian markets are closed for the Lunar New Year holiday and volatility in Europe has been curbed by anticipation of tomorrow's U.S. CPI numbers. Any signs that price pressures are gaining momentum again could push rate cut bets further into the future.

But for now, the stock market has 5,000 good reasons why this might not matter too much as long as the economy continues to hold up as well as it has in the early weeks of 2024.

Key developments that should provide more direction to U.S. markets later on Monday:

* NY Fed 1-yr inflation expectations

* Federal Reserve Board Governor Michelle Bowman speaks at the American Bankers Association Conference for Community Bankers.

* Federal Reserve Bank of Richmond President Thomas Barkin speaks before the Atlanta Economics Club.

Federal Reserve Bank of Minneapolis President Neel Kashkari participates in conversation hosted by the Economic Club of Minnesota.

(Reporting by Amanda Cooper; Editing by Kirsten Donovan)