Breaking News
Get 40% Off 0
Is NVDA a 🟢 buy or 🔴 sell? Unlock Now

Resurgent S&P 500 crests new 2023 closing high after roller-coaster year

Published Dec 01, 2023 04:54PM ET Updated Dec 03, 2023 11:00AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: The New York Stock Exchange building is seen from Broad Street in Lower Manhattan in New York, January 20, 2016. REUTERS/Mike Segar/File Photo
 
US500
+2.11%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

By Lewis Krauskopf

(Reuters) -A searing late-year rally has brought the S&P 500 to a fresh 2023 closing high, as investors bet the Federal Reserve is done raising interest rates and the U.S. economy will remain resilient in the face of tighter monetary policy.

The benchmark index closed at 4,594.63, nearly 6 points above its previous closing high for 2023 set in late July. The index gained 0.6% on Friday after bullish investors grew more confident the rate cycle had peaked following comments from Fed Chair Jerome Powell.

Signs that inflation is cooling after reaching a four-decade high last year have made investors more confident that the Fed will start cutting rates sooner than expected.

At the same time, the Fed’s aggressive rate increases so far appear to have done little damage to the U.S. economy, despite fears that tighter monetary policy would hurt growth. The S&P 500 is up over 19% year-to-date after posting its biggest monthly rise in over a year in November. The index stood about 4% below its all-time closing high from January 2022.

Stocks have faced down several crises this year, starting with the implosion of Silicon Valley Bank in March that sparked worries over the health of the broader banking system.

A legislative showdown over raising the U.S. debt ceiling became a key concern for investors months later, with equities gaining support once a deal was reached.

The S&P 500 reached its previous 2023 closing high on July 31, also spurred in part by excitement over developments in artificial intelligence technology.

A steady rise in Treasury yields - which dulled the allure of stocks compared to bonds and other investments - began eroding those gains, resulting in a sell-off that eventually erased more than half of the index’s year-to-date advance.

However, many investors came away from the Fed’s Nov. 1 meeting more confident that the central bank was close to wrapping up its rate increases. Data on Nov. 14 showed that consumer prices were unchanged on a monthly basis for October, the first such reading in more than a year, sparking a sizable stock rally.

Federal funds futures, a widely used security for hedging short-term interest rate risk, imply a Fed funds rate of 4.54% by the end of July, versus 5.12% expected three months ago for that period, according to LSEG data.

Cooling inflation has been accompanied by little of the economic damage that many expected to come with the Fed’s rate hikes - giving rise to hopes of a so-called Goldilocks scenario where the central bank is able to staunch the growth in consumer prices without badly hurting growth. The economy appears to have avoided a recession this year that was widely forecast at the beginning of 2023, though growth in key areas such as employment has slowed. The Citigroup Economic Surprise Index, which measures how economic data performs versus expectations, has been positive for virtually all of 2023.

Of course, some investors worry that the cumulative effects of the Fed’s 525 basis points of tightening are only starting to manifest and will eventually cool growth far more than currently expected.

A cadre of massive stocks has been the key engine of most of the S&P 500’s 2023 gains thanks to their outsized weightings in the index. The so-called "Magnificent Seven" -- Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOGL), Amazon (NASDAQ:AMZN), Nvidia (NASDAQ:NVDA), Meta Platforms (NASDAQ:META) and Tesla (NASDAQ:TSLA) -- have seen stock gains of between about 47% and 220% so far this year. The companies perceived safety as investments given their size and competitive advantages has benefited the stocks, while a number of them have also been fueled by enthusiasm about the profit potential of artificial intelligence. The megacaps' outperformance has increased their combined weight to well over one-fourth of the entire S&P 500, meaning the stocks' moves have outsized influence on the benchmark index.

To be sure, the S&P 500’s rapid rise has also made it richly valued compared to its historic levels, which could be an obstacle for the rally.

The S&P 500 currently trades at roughly 19 times forward earnings estimates, compared to a historical average of 15.6 times.

Resurgent S&P 500 crests new 2023 closing high after roller-coaster year
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.
  • Any comment you publish, together with your investing.com profile, will be public on investing.com and may be indexed and available through third party search engines, such as Google.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (4)
Jimmy Wave
Jimmy Wave Dec 03, 2023 9:11PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
indexes should be higher. All the downturn is just back to even
Firouz Nasirpour
Firouz Nasirpour Dec 02, 2023 6:08AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
seem we don't have reception
Dudley Hiles
Dudley Hiles Dec 01, 2023 6:19PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Seems like a lot of cherry picking fluff. Gold is never mentioned as it closes on a record.
Otis Grant
Otis Grant Dec 01, 2023 4:59PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Nonsense it closed over 4600 this year
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email