The S&P 500 closed at an all-time high on Friday as investors returned to buying equities in force following a short-lived market stumble to start the new year. This resurgence in investor confidence led to a significant rise in the broad market index, settling at 4,839.81. Surpassing both the prior record intraday and closing highs from January 2022, this new high signifies a strong recovery for the stock market.
Market Performance
Throughout the week, the Dow Jones Industrial Average and the Nasdaq Composite also experienced notable gains. The Dow Jones Industrial Average, after setting its own record at the end of last year, added 395.19 points to close at 37,863.80, reflecting a 1.05% increase. Similarly, the Nasdaq Composite rose by 1.70% to reach 15,310.97, while the smaller, more tech-focused Nasdaq-100 gained 1.95%, also hitting a record high. All three major averages are now in positive territory for 2024, with the 30-stock Dow going green during Friday’s rally.
After a 19% loss in 2022, the S&P 500 made a strong comeback in 2023. Posting a 24% gain, the economy skirted a recession that many had expected, and inflation came down to manageable levels, allowing the Federal Reserve to pause its interest rate hikes. Although the benchmark came close to reaching a record following a forceful fourth-quarter rally, it fell short. Nonetheless, Friday’s milestone confirms that the stock market is officially in a bull market that began in October 2022, rather than just a temporary bounce within a bear market. The S&P 500 has surged by over 35% since its low point.
The market’s resurgence has been largely driven by the strong performance of companies in the tech sector, particularly those involved in artificial intelligence (AI) and differentiated products. These tech leaders have greatly influenced the market’s upward trajectory in 2023 and continue to do so in 2024. With a gain of 2.35% on Friday and over 4% throughout the trading week, the tech sector has proven to be the best-performing sector within the S&P 500.
Despite the market’s recent success, the sustainability of its growth remains uncertain. According to Matt Stucky, chief portfolio manager at Northwestern Mutual Wealth Management, the ability of the Federal Reserve to manage a “soft landing” will determine whether the market can maintain its growth momentum in 2024. He points out that the S&P 500’s growth in 2023 was driven by multiples, rather than earnings. Multiples tend to rise after economic slowdowns as investors anticipate a recovery. However, if this recovery does not materialize as expected, holding on to new highs and achieving further record highs may become challenging.
Consumer Confidence and Earnings
Fresh consumer data released on Friday indicates an increase in consumer confidence regarding the economy and inflation. The University of Michigan’s Survey of Consumers revealed a 21.4% year-over-year jump, reaching its highest level since July 2021. Additionally, several companies experienced positive outcomes. Insurance company Travelers saw a 6.7% rise in its stock price after posting an earnings beat. Schlumberger gained 2.2% after surpassing expectations on both top and bottom lines. Ally Financial also performed well, surging over 10% after reporting strong quarterly results and finalizing the sale of a business unit to Synchrony Financial.
The S&P 500’s record high and the strong performance of other major indexes indicate a resilient recovery for the stock market. However, the sustainability and future growth of the market remain uncertain, dependent on factors such as the Federal Reserve’s actions and the realization of economic recovery. Nevertheless, the tech sector continues to lead the market, contributing significantly to its upward momentum. With both consumer confidence and company earnings on the rise, there is potential for continued market growth in the coming months.
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