(Bloomberg) — The S&P 500 index set new closing and intraday highs in two years on Friday, capping a stunning rebound from a steep decline in 2022.
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This resurgence is being driven by the so-called “Magnificent Seven” technology companies: Apple Inc., Microsoft Corp., Nvidia Corp., Alphabet Inc., Amazon.com Inc., Meta Platforms Inc., and Tesla Inc. , this is largely due to investor expectations for artificial intelligence and cost-cutting efforts that have fueled a profit boom for those companies.
It also has significant support from the Federal Reserve, which has completed its tightening of monetary policy in decades and appears to be considering when to start cutting rates.
Let's take a look at the wild rise and fall of the S&P 500.
The path from the previous record set in January 2022 required 512 trading sessions. This is the longest dry season in more than a decade, according to data compiled by Bloomberg.
But historically, a 512-day streak isn't all that surprising. In the 1970s, the S&P 500 index did not record for more than seven years as inflation soared and growth stagnated.
After peaking two years ago, the S&P 500 lost a quarter of its value to a closing low of 3,577.03 on October 12, 2022. Since then, its market cap has increased by more than $10 trillion while recovering from its 2022 stock price. It was the worst year for the index since the 2008 financial crisis.
The final setback came as fast-growing tech companies were hit by rising interest rates. Additionally, the war between Russia and Ukraine has created a humanitarian crisis in Europe, causing oil prices to soar above $100 per barrel and inverting part of the Treasury yield curve.
The information technology, communications services, and consumer staples sectors led the S&P 500 index's rebound in 2023. These sectors also include the Magnificent Seven technology companies.
In the first half of 2023, the top seven S&P 500 companies outperformed the rest of the index for the most time since the dot-com bubble. Apple surpassed $3 trillion in market capitalization in December after rising nearly 50% last year.
Nvidia, whose stock price soared in 2023 after May's big sales forecast that ignited AI excitement, is up more than 400% since October 2022, earning it top spot on the S&P 500 index. followed by Royal Caribbean Cruises and Advanced. Micro Devices Inc., Meta and Broadcom Inc.
In terms of index point contribution, Microsoft maintains the top spot with an additional 156.90 points. Nvidia added 141.54 points, Apple contributed 95.40 points, and Meta and Amazon rounded out the top five.
First Republic Bank and SVB Financial Group were the two worst-performing banks on the S&P 500 index last year as multiple regional financial institutions failed. First Republic plunged nearly 100% and was eventually acquired by JPMorgan Chase, while SVB lost nearly 70% following the bankruptcy of its Silicon Valley bank subsidiary.
Other major decliners during this period were Lumen Technologies, Advance Auto Parts, and Enphase Energy, each down about 60%. Most of these worst performers are no longer part of the S&P 500.
–With assistance from Alexandra Semenova.
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