New York CNN — The S&P 500 surpassed the 5,000 level on Friday for the first time, reflecting a positive sentiment on Wall Street and investor enthusiasm over new data indicating progress in controlling inflation.
This achievement comes amid a period of robust economic expansion, the rise of artificial intelligence, a better-than-expected earnings season, and anticipation of a shift by the Federal Reserve to start reducing rates.
The S&P 500 briefly crossed the 5,000 mark for the first time during Thursday’s trading.
According to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, it took nearly 41 years for the S&P 500 to reach its initial major milestone of 1,000, which occurred on February 2, 1998.
Following the Fed’s rate cuts to nearly zero, government stimulus injected into the economy, and optimism stemming from the Covid-19 vaccine for post-pandemic economic growth, the index achieved its previous significant milestone of 4,000 on April 1, 2021.
On January 19, the benchmark index set a new record for the first time in two years, closing at a level that surpassed its previous high of 4,796.56, reached on January 3, 2022. In January alone, the index established six new records.
CFRA Research’s Sam Stovall noted that when the S&P 500 reaches a new high in January, it tends to achieve new highs in February approximately 75% of the time. Furthermore, when new highs are set in both months, the index has historically generated an average return of around 16% and subsequently closed the year at a higher level approximately 88% of the time.
The S&P 500 has risen by roughly 5.4% thus far this year. In 2023, the index surged by 24%, with stock prices rallying strongly toward the end of the year as optimism increased in anticipation of the Federal Reserve achieving a soft landing, meaning regulation of inflation without triggering an economic recession.
The ascent to new peaks has been predominantly driven by a small number of companies known as the “Magnificent Seven,” including Nvidia, Microsoft, Meta Platforms, Amazon, Apple, Alphabet, and Tesla.
Shares of Nvidia, Microsoft, Meta Platforms, and Alphabet reached record levels multiple times last month.
Scott Wren from Wells Fargo Investment Institute pointed out that when the stock market climbs higher, it is most favorable if multiple sectors and stocks are participating.
According to Silverblatt, the returns on the Magnificent Seven stocks contributed to about 62% of the benchmark index’s total return of 26% last year.
