Stocks advanced as expectations for resilient economic growth and solid corporate results bolstered Wall Street's risk-on bid.
Equities are shaking off a rocky start to the year amid conviction that the Federal Reserve will soon cut interest rates and bets that the artificial-intelligence boom is set to continue.
Meanwhile, earnings season continues to roll in, with companies including Netflix Inc., Tesla Inc. and Intel Corp. due to release results this week.
"The equity rally we are seeing is based on on the soft-landing scenario that's being priced," said Charles Diebel at Mediolanum International Funds. "If the economy does well, then why would you sell equities? And the counterfactual for equity markets is that if things do weaken, they will get rate cuts."
The S&P 500 extended its advance above 4,800, led by gains in big tech. Treasury 10-year yields declined three basis points to 4.09%. The dollar wavered.
Last week's record close for U.S. stocks has pulled valuations back to the highs seen last July. But a closer look shows that the market isn't as expensive as it appears, according to Citigroup Inc.'s Scott Chronert.
Gains in Apple Inc., Microsoft Corp., Nvidia Corp., Alphabet Inc., Amazon.com Inc., Meta Platforms Inc. and Tesla Inc. have powered the resurgence on Wall Street, largely based on optimism around artificial intelligence and cost-cutting efforts at these companies.
The equally weighted version of the S&P 500 strips out some of their outsized influence and results in a ratio of around 16 times forward earnings, a discount of 17% to the benchmark's standard valuation.
"Valuation is a common pushback to our constructive S&P 500 outlook," the strategist wrote. "In our view, index P/E can be misleading."
Options traders are betting on more gains in the S&P 500 after it hit a record high on Friday.
A slew of bullish wagers shifted the yardstick of what's seen as the upper bound of the US benchmark's trading range.
The so-called call wall has moved to 5,000 points from 4,800 — signaling that traders see the market clearing the next hurdle toward further gains, according to SpotGamma data. That points to a further 3.3% of upside, based on Friday's close.
