S&P 500 Index hit record highs, a major achievement in two years

The S&P 500 Index made a remarkable comeback on Friday, hitting new closing and intraday highs for the first time in two years.

This recovery is a significant turnaround from the turbulent selloff in 2022.

The revival is being driven by the well-known Magnificent Seven technology companies – Apple Inc., Microsoft Corp., Nvidia Corp., Alphabet Inc., Amazon.com Inc., Meta Platforms Inc., and Tesla Inc. This resurgence is mainly attributed to investors' optimism surrounding artificial intelligence and cost-reduction measures that resulted in significant profit growth for these firms. 

Additionally, it is receiving substantial support from the Federal Reserve, which seems to have concluded its interest rate hikes and is now contemplating the timing of its next move - initiating a reduction after implementing the most extensive monetary tightening effort in years.

S&P 500's volatile periods

The duration of 512 trading sessions to reach a new record in January 2022 is the longest period in over a decade, as per data collected by Bloomberg.

Nevertheless, from a historical standpoint, the 512-day streak is not exceptionally noteworthy. Back in the 1970s, the S&P 500 went over seven years without achieving a new record due to soaring inflation and stagnant growth. 

The S&P 500 reached its highest point two years ago and then lost as much as 25% of its value before hitting a closing low of 3,577.03 on Oct. 12, 2022. Since then, it has gained over $10 trillion in market value as it recovered from the 2022 selloff, which was the index's worst year since the 2008 financial crisis.

The rapid decline occurred when burgeoning technology firms were severely impacted by the surge in interest rates. Furthermore, the conflict between Russia and Ukraine resulted in a dire humanitarian situation in Europe, while oil prices skyrocketed above $100 per barrel and certain sections of the Treasury yield curve became inverted.

In 2023, the S&P 500 witnessed a remarkable rebound, driven by the impressive performance of the information technology, communication services, and consumer-discretionary sectors. These sectors not only played a pivotal role in the market's recovery but also served as the home for the Magnificent Seven technology companies.

During the initial six months of 2023, the seven largest corporations within the S&P 500 exhibited exceptional performance, surpassing the remaining constituents of the index by a magnitude unparalleled since the dot-com bubble. Apple, having experienced a remarkable surge of almost 50% throughout the preceding year, successfully reclaimed a market capitalization exceeding $3 trillion in December. 

Nvidia, having experienced a remarkable surge in its stock value in 2023, thanks to an impressive sales projection in May that ignited widespread excitement for AI, now claims the prestigious title of being the leading percentage-gain contributor to the S&P 500 since October 2022. With a staggering rally of over 400%, Nvidia is followed closely by Royal Caribbean Cruises Ltd., Advanced Micro Devices Inc., Meta, and Broadcom Inc. 

Microsoft is the leading contributor in terms of index-point contributions, with a total of 156.90 points. Nvidia follows closely behind with 141.54 points, while Apple contributed 95.40 points. Completing the top five are Meta and Amazon.

Last year, First Republic Bank and SVB Financial Group were the poorest performers in the S&P 500, with several regional lenders failing. First Republic's value dropped almost 100% and it was eventually acquired by JPMorgan Chase & Co., while SVB lost nearly 70% after its Silicon Valley Bank subsidiary collapsed.

Other significant losers during that period included Lumen Technologies Inc., Advance Auto Parts Inc., and Enphase Energy Inc., all of which experienced a substantial decline of approximately 60%. It is worth noting that the majority of these underperforming companies have since been removed from the S&P 500 index.