New High for S&P 500 Index!

New Index High

The S&P 500 Index hit an all-time high on Friday, confirming that the stock market is in a bull market and signaling that the rally will continue into 2024. This came ahead of balance sheet reports and inflation data due next week. The S&P 500 rose more than 1% on Friday, surpassing its closing and intraday records reached in January 2022. The index ended the day at 4,839.81 points.

What was the Reason?

An encouraging sign for stocks despite concerns that economic growth will slow. Some think stocks are overvalued after the Fed took a soft turn last month, pricing in more rate cuts than central bank policymakers have signaled. "There's nothing bear market about new highs," said Katie Stockton of Fairlead Strategies, noting that the major indexes hitting all-time highs has cleared resistance on the charts. Stockton said she expects information technology, communication services, consumer spending, financials and industrials to outperform in a positive market outlook.
Other technical analysts are also optimistic about the stock market. Oppenheimer's Ari Wald noted that given historical examples, on 13 of the 14 occasions when the S&P 500 reached its previous all-time high at least a year later, the index was higher a year later. Wald said the index was in line with the average return after one month, but there were "particularly positive" returns after three to 12 months.
For 2024, Wald expects the S&P 500 to be at 5,400 by the end of the year, up about 12%, and he particularly favors mid-cap growth stocks. This week, interest rate decisions of central banks will be announced both in Turkey and Europe on Thursday. On the other hand, on the last day of the week, personal consumption expenditures data, which is the FED's primary inflation indicator, will be followed. An inflation reading in line with expectations or lower may be welcomed by investors.
Investors expect that further signs of cooling prices will prompt the Fed to cut rates sooner. CME FedWatch shows that markets are pricing in a 46% probability of a quarter-point rate cut in March, down significantly from 77% a week ago.

Index Journey

Now that the S&P 500 Index has made an impressive comeback from the great sell-off of 2022, setting two-year closing highs and intraday records, let's take a look at its journey through the charts. This resurgence has been driven by profit gains from seven major tech companies - Apple, Microsoft, Nvidia, Alphabet, Amazon, Meta and Tesla - thanks to artificial intelligence and cost-cutting efforts. The index is also receiving significant support from the Federal Reserve, which has stopped raising interest rates and is now considering rate cuts after the biggest monetary tightening campaign in years.
It has been 512 trading sessions since the index's previous record in January 2022. That was the longest period of stagnation in more than a decade, according to data compiled by Bloomberg. Historically, in the 1970s, the S&P 500 failed to set a record for more than seven years as inflation skyrocketed and growth stagnated.
After reaching its peak, the S&P 500 lost a quarter of its value, closing at a 2022 low of 3,577.03 points. Since then, it has recovered from its worst year in 2022, adding more than $10 trillion to its market capitalization.
Undoubtedly, the sector that led the recovery in 2023 was the Technology sector. In particular, the seven largest technology companies held the flag. In the first half of 2023, the seven largest companies in the S&P 500 had the most divergent performance from the rest of the index since the dot-com bubble. Apple has rallied almost 50% in the past year, bringing its market capitalization back above $3 trillion in December.
Top Contributors to the S&P 500:
Nvidia has been the biggest percentage gainer in the S&P 500 since October 2022, boosting its stock price by more than 400% on the back of a big sales forecast that ignited AI hype in 2023. Microsoft contributed the most points to the index.
Worst Performing Companies:
First Republic Bank and SVB Financial Group were the two worst performers in the S&P 500 last year. First Republic lost almost 100% of its value and was taken over by JPMorgan Chase & Co. SVB lost almost 70% after the failure of its Silicon Valley Bank subsidiary. Most of these worst-performing companies are no longer in the S&P 500.