The biggest thing that lifted global markets this week was the rally in Big Tech stocks. But in the United States, we couldn't have done it without a little help from our friends.
One detail emerged this week as the S&P 500 SPX posted its best weekly gain since early January, according to Dow Jones Market Data. That means all 11 sectors of the large-cap index managed to finish in the green for the first time since his November. The S&P 500 on Friday set a new record closing price for the 13th time in 2024, even as information technology stocks and other Big Tech-related sectors closed in the red, according to FactSet data. did it.
It's the latest sign that market breadth, which many Wall Street bears have cited as a major vulnerability, is quietly improving after a brief lull. This is despite the fact that Big Tech, semiconductor stocks, and the artificial intelligence fad continue to capture the majority of attention. Sam Stovall, CFRA's chief investment officer, said the percentage of investors is high.
“It's like a rising tide lifts all boats. There are many more participants in this advance. It's not just the 'Magnificent Seven.' This euphoria appears to be lifting all sectors, most industries and stocks. ”
Interestingly, information technology was only the second-best performing sector this week.Nvidia's
NVDA
Stocks posted a historic jump on Thursday following the latest blockbuster earnings report. The chipmaker's performance sparked a global rally in semiconductor stocks.
When the dust settled on Friday, the top performers were consumer staples, a defensive sector that has lagged well behind the S&P 500, not to mention communications services, information technology and consumer staples, which have been beating the market. , three sectors that are home to “great markets.” Seven” — essentially for the past year. Over the past 12 months, consumer staples rose 4.2%, while the S&P 500 index rose 26.9%.
But this week, it came out on top with help from companies like Costco Wholesale Corporation.
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It rose 1.9% through Friday, hitting a record high, according to FactSet data.
Information technology received the most attention, but it was only one of three sectors to hit new highs this week. The rest were healthcare and industry. The healthcare industry is home to fast-growing Eli Lilly and Company.
Lily
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The industrials sector does not include the top 10 stocks that many credit with driving the S&P 500's rise over the past year.
| S&P 500 Sector | Profit for week ending February 23rd |
| Daily necessities | 2.1% |
| information technology | 2% |
| material | 1.9% |
| industrial | 1.8% |
| finance | 1.6% |
| Consumer voluntary | 1.54% |
| health care | 1.51% |
| communication service | 1.49% |
| public works | 1.2% |
| real estate | 0.9% |
| energy | 0.4% |
Looking across sectors and industries, a closely watched measure of market breadth shows that more individual large-cap stocks are participating in the rally.
On Friday, the percentage of S&P 500 stocks trading above their 50-day moving average rose to more than 67%, according to Dow Jones Market Data. That's still well below the 91% high reached on Jan. 2, but just short of this year's low of 51% on Feb. 13, according to Dow Jones Market Data. is a marked improvement.
But the improvement in the number of advancers is not limited to the S&P 500. Vincent Randazzo, head of technical research at Raleigh Technical Analysis, tracks several indicators of the broader market, including mid- and small-cap stocks.
The Raleigh Operating Companies Only Gauge covers all stocks traded on the New York Stock Exchange, excluding preferred stocks, closed-end bond funds, and ADRs, and measures the share of companies whose stock prices are increasing. Measure market breadth by It also tracks the number of NYSE-listed companies trading within 2% of their 52-week high.
By the latter measure, the percentage of mid-cap stocks trading at or near their all-time highs rose to 34% as of Thursday, compared to 5% in October, when the S&P 500 hit its 52-week low. It has been rising since.
The turnaround for large-cap stocks was even bigger, with just 4% of stocks trading at or near their 52-week highs at the low, but that number had improved to 41% as of Thursday.
“Despite the fact that these big players are still doing very well, the market is expanding behind the scenes,” Randazzo said.
Randazzo said mid-cap companies joining their large-cap peers suggests the bull market could continue. “We will also have a second phase of participation,” he said.
But small-cap stocks can still be a fly in the ointment, with only 13% of stocks trading within range of their 52-week highs. The Russell 2000 RUT, one of the most closely watched small-cap indexes, fell 0.8% this week and remains in the red this year after brief but strong gains in November and December.
Perhaps the most interesting aspect of the rally's increased participation is that it coincided with the Fed's adoption of more conservative expectations for the pace of rate cuts. According to federal funds futures tracked by CME, traders are currently betting that the first rate cut will take effect in June, pushed back from expectations earlier this year that the cut would take place in March. There is.
The company also lowered its forecast for the number of cuts by the end of the year from six to four. Stocks have soared in a broad bull market that began in November, when Fed officials began hinting that the central bank might remove its rate-hike bias from its guidance, and Chairman Jerome Powell finally did so in December. This shift sparked a ferocious rally, with lagging small-cap stocks briefly outperforming big tech stocks.
One possible explanation is the strength of the US economy. According to the US government's initial estimates, GDP expanded by 3.3% in the fourth quarter. Expansion is expected to continue at a similar pace, with GDP now on track for 2.9% growth in the first quarter of 2024, according to the Atlanta Fed's GDPNow forecast.
Inflation may have picked up in January, but investors were seeing the pace of goods inflation slowing beneath that headline number. Meanwhile, James St. Aubin, chief investment officer at Sierra Mutual Funds, said the service industry hotspots are easy to explain.
“When you combine this with growth being this strong, there is no reason for the Fed to cut rates aggressively. “It's a perfect scenario in many ways for this,” he said in an interview with MarketWatch.
Still, the top 10 stocks still account for about 30% of the S&P 500's market capitalization, which is higher than at the peak of the dot-com bubble, St. Aubin cautioned.
“The breadth in the fourth quarter was pretty good, but it faded early in the first quarter. [and] Now it seems to be coming back little by little,” St. Aubin added. “However, extreme concentration is still a problem.”
The S&P 500 rose 1.7% this week to 5,088.80, its biggest weekly gain since Jan. 12, according to Dow Jones Market Data. The Nasdaq Composite Index rose 1.4% to 15,996.82. Meanwhile, the Dow Jones Industrial Average DJIA rose 503.54 points (1.3%) to 39,131.53.
