The S&P 500 (^GSPC) is back near all-time highs.
Recent gains in tech stocks, including a nearly 30% surge in Nvidia (NVDA), have lifted the index more than 7% since its August 5th low.
Meanwhile, the so-called “Magnificent Seven” tech stocks — Apple (AAPL), Alphabet (GOOGL, GOOG), Microsoft (MSFT), Amazon (AMZN), Meta (META), Tesla (TSLA), and Nvidia (NVDA ) — The company’s market capitalization increased by more than $1.4 trillion, nearly half the $3.2 trillion the S&P 500’s market capitalization has increased since Aug. 5.
After posting a steep decline in July, the recent surge brought the Nasdaq Composite Index (^IXIC) out of correction in 11 days, the shortest correction since October 2011.
Ed Clissold, chief U.S. strategist at Ned Davis Research, recently told Yahoo Finance that given how tech companies led the drawdown losses, “it makes sense that they would recover.” .
And now, some of the sector’s biggest companies are sitting near 52-week highs ahead of a key earnings report from Nvidia on August 28th.
During the second quarter earnings season, some of Nvidia’s AI-powered rivals offered mixed results but struggled to meet Wall Street’s expectations.
“This is the ninth consecutive day of gains for the S&P,” Dan Niles, founder of Niles Investment Management, told Yahoo Finance on Tuesday. “This is the longest run since 2004. I don’t necessarily want to shoehorn that into the Nvidia article.
“But I think if you’ve been thinking about this for a few years and not worrying about what’s going to happen the next day, you should be in pretty good shape.”
A sign is posted at the Nvidia office building on Wednesday, August 7, 2024 in Santa Clara, California. (AP Photo/Jeff Chiu) · ASSOCIATED PRESS
While AI trading is once again leading the market in the near term, there are encouraging developments behind the scenes.
The S&P 500 Equal-Weighted Index (^SPXEW) just hit a new all-time high because it is less sensitive to the movements of large tech companies than the cap-weighted S&P. Sectors such as Utilities (XLU), Consumer Staples (XLP), and Healthcare (XLV) are currently at 52-week highs, while Financials (XLF) is currently at record levels.
“From our perspective, this is a really healthy rally,” Abby Yoder, U.S. equity strategist at JPMorgan, told Yahoo Finance. “There’s such a spread. The spread is the highest it’s been since last summer. In terms of participation across different sectors, different names.”
Still, the S&P 500 index is up nearly 18% this year, outpacing the equally weighted index’s nearly 9% this year.
“The reality is that in a bull market, all sectors typically go up,” said Kevin Gordon, senior investment strategist at Charles Schwab.
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In July, Mr. Gordon’s team at Schwab noted in the Yahoo Finance Chartbook that the number of S&P 500 companies outperforming the index for two consecutive months had fallen to a historic low.
Since then, that story has completely reversed. As of Monday’s close, about 58% of S&P 500 members had outperformed the index, the largest outperformance since the current bull market began in November 2022.
“This trend is much more important,” Gordon said. “When you take these indicators together, the situation looks relatively healthy.”
Recent economic data shows the U.S. economy is slowing but still growing, and market movements in the past few weeks have pushed for a soft landing on trade that trade strategists have been discussing since early 2024. Consistent with expansion.
And JPMorgan’s Yoder said that while tech is still likely to contribute to the rally, “the growth backdrop certainly looks healthy and we’re about to embark on a Fed cycle, so other sectors are There could be more room in the rotation.” ”
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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