The S&P 500 achieved a significant milestone on Friday, closing at an all-time high and marking a robust return to equities after a brief market stumble at the beginning of the new year. Investors, displaying renewed confidence, drove the broad market index up by 1.23% to settle at 4,839.81, surpassing the previous record intraday and closing highs from January 2022.
The Dow Jones Industrial Average, having set its own record at the close of the previous year, joined the rally by adding 395.19 points, or 1.05%, to finish at 37,863.80. Simultaneously, the Nasdaq Composite surged by 1.70% to reach 15,310.97, while the more tech-focused Nasdaq-100 saw a remarkable 1.95% gain, also reaching a record high.
As of Friday’s rally, all three major averages are in positive territory for 2024, with the 30-stock Dow entering the green. This bullish turn follows a challenging 2022, during which the S&P 500 experienced a 19% loss. However, the market rebounded strongly in 2023, posting a 24% gain as economic concerns of an impending recession subsided, and inflation levels allowed the Federal Reserve to pause its interest rate hikes.
Despite a robust fourth-quarter rally in 2023, the S&P 500 fell just short of reaching a record high. The beginning of 2024 saw a pause in the market rally as investors opted to take profits, particularly from major tech players like Apple. However, recent days witnessed a resurgence in buying, confirming the stock market’s transition into a bull market that commenced in October 2022, rather than a temporary bounce within a bear market. Since the low in October 2022, the S&P 500 has surged by more than 35%.
According to Matt Stucky, chief portfolio manager at Northwestern Mutual Wealth Management, investors continue to favor companies leading in artificial intelligence (AI) or those with a differentiated product set in the tech space. This trend has persisted from the latter part of last year into 2024, contributing significantly to the market’s overall performance.
On Friday, the tech sector experienced a notable gain of 2.35%, making it the S&P 500’s best-performing sector for the week, with an impressive increase of over 4%. Stucky emphasized the strength of companies excelling in AI and those with unique offerings in the technology domain as major drivers of market leadership.
Looking ahead, the sustainability of the market’s growth momentum in 2024 raises questions about the Federal Reserve’s ability to execute a soft landing. Stucky pointed out that the S&P 500’s growth in 2023 was driven by multiples rather than earnings. Multiples typically rise as the economy emerges from slowdowns, as investors price in expectations of a recovery. Stucky cautioned that if this anticipated recovery fails to materialize, the sustainability of new highs and the potential for further increases could be called into question.
Recent consumer data provides a mixed but generally positive picture. The University of Michigan’s Survey of Consumers reported a year-over-year jump of 21.4%, reaching its highest level since July 2021. This indicates growing confidence among consumers regarding the economy and inflation. However, the broader market’s ability to maintain its growth momentum remains contingent on economic factors and the Federal Reserve’s monetary policies.
In the corporate arena, notable performances were observed, contributing to the positive sentiment. Insurance company Travelers saw a 6.7% rise after posting earnings that surpassed expectations. Schlumberger gained 2.2% after beating estimates on both the top and bottom lines. Ally Financial surged over 10% following robust quarterly results and the announcement of the sale of a business unit to Synchrony Financial.
As the market continues to navigate uncertainties and external influences, investors remain vigilant about potential headwinds and the overall economic landscape. The resilience displayed by the S&P 500 and other major indices in the face of challenges underscores the adaptability and dynamism of financial markets.