S&P 500 Climbs as Robust Amazon and Apple Earnings Fuel Market Rebound

US stocks advanced on Friday, driven by stellar earnings from Amazon.com Inc. and an optimistic holiday forecast from Apple Inc., reigniting investors’ appetite for risk.

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The S&P 500 climbed 0.5% as of midmorning in New York, on track to log its sixth consecutive month of gains. The index has rallied nearly 40% since hitting a low in April marking one of the fastest rebounds in market history. Meanwhile, the tech-heavy Nasdaq 100 gained 1%, bolstered by strong momentum in major technology names.

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Amazon shares soared after the company reported its fastest cloud growth in nearly three years. Apple also lifted investor confidence by projecting a strong jump in holiday sales, fueled by demand for its latest iPhone lineup. The upbeat guidance reassured markets that the iPhone remains the company’s primary driver of growth.

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Investor sentiment received another boost from progress on U.S.-China trade relations. President Donald Trump announced that both nations had “settled” disputes over China’s rare earths following a meeting with Chinese President Xi Jinping. The development was welcomed by traders eager for signs of easing geopolitical tensions.

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However, the broader economic backdrop remains uncertain. The Federal Reserve recently signaled reluctance to pursue additional rate cuts, while the ongoing U.S. government shutdown has halted the release of key economic data leaving investors with limited insight into the current state of the economy.

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Kansas City Fed President Jeff Schmid, who voted against the latest rate reduction, said he remains concerned that stronger economic growth and investment could fuel inflationary pressures. Dallas Fed President Lorie Logan shared a similar stance, suggesting that with inflation still elevated, keeping rates steady at the next meeting could be the most prudent course of action.

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U.S. equities are heading for another impressive year, though derivatives traders are signaling expectations of slower gains ahead. Options activity tied to the S&P 500 shows a concentration of bets around the 7,000 level by late December a milestone that would reflect a 19% rise for 2025. Yet, with the index closing Thursday at 6,822.34, that target implies only about 2.5% upside over the remaining months of the year.

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Bank of America Corp. strategists warn that while enthusiasm around artificial intelligence has fueled remarkable gains, valuations are beginning to look stretched. They suggest that Chinese equities and gold offer the most effective hedges against potential volatility stemming from the AI-driven boom.

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Currently, the S&P 500 trades at 23 times projected earnings well above its 20-year average multiple of 16. The so-called “Magnificent Seven,” a group of tech giants that dominate the index, make up more than one-third of its total weighting. Their valuations are even more elevated, trading at roughly 31 times forward earnings.

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“AI equity leadership isn’t going anywhere for now,” said a team of Bank of America strategists led by Michael Hartnett in a recent note. “We still favor gold and Chinese stocks as the best hedges against a possible boom or bubble scenario.”

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The combination of blockbuster tech earnings, improving trade relations, and cautious monetary policy commentary has kept investors largely optimistic heading into year-end. Yet, with stock valuations already hovering near historic highs, market participants may start looking for balance between growth potential and risk management.

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For now, Wall Street seems content riding the wave of Big Tech’s success, but as expectations tighten and the year winds down, even the strongest rally may need new catalysts to sustain its momentum.

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