The S&P 500 reached a new all-time closing high on Friday, but despite this achievement, most of its sectors have yet to surpass levels seen when the index last peaked over two years ago, according to research from DataTrek.

Sector Gains Analysis

In a recent note, DataTrek evaluated the gains of S&P 500 sectors over the approximately two-year period leading up to January 19th. This was the day when the index closed at a record high, surpassing its previous all-time peak on January 3, 2022.

According to Nicholas Colas, co-founder of DataTrek, “The rising tide to new highs has lifted very few boats, with only 3 groups up since the S&P’s last top in early 2022.” The sectors that experienced gains from the index’s old record high in that year to its fresh peak on Friday were energy, technology, and industrials.

Energy saw the biggest gains during this period, with an increase of approximately 40%. However, it is important to note that the energy sector’s impact on the overall index is relatively small, as it currently has a weighting of only 3.7%. Colas mentions that “Energy was in the doldrums 2 years ago, so its gains are understandable.”

Tech Sector Standout

Within the S&P 500, the information technology sector holds the largest share, accounting for about 30% of the index’s weighting, as reported by FactSet data.

DataTrek highlights the impressive performance of two megacap tech companies in the S&P 500: Nvidia Corp. (NVDA) and Microsoft Corp. (MSFT). According to their research, both companies reached new highs on Friday.

In conclusion, while the S&P 500 reached a new all-time high, the gains across sectors have varied. Energy, technology, and industrials were the only sectors to see an increase from the index’s previous peak in early 2022 to its current milestone. Additionally, the tech sector, led by companies like Nvidia and Microsoft, demonstrated remarkable performance amidst this market development.

The Impact of Big Tech Stocks on the S&P 500

The recent success of the S&P 500 can be partially attributed to the influence of two prominent companies – Nvidia and Microsoft. Their contribution alone has accounted for a notable 1.1 percentage points of the S&P 500’s overall 1.5% gain so far this year. Without their influence, the index would not have achieved its record close on Friday.

These two companies are part of a larger group known as Big Tech, which consists of seven mega-cap stocks. Together, these tech giants have been instrumental in driving the gains of the S&P 500 in 2023. The group spans across various sectors, including technology, communication services, and consumer discretionary. The other members of this group include Apple Inc., Amazon.com Inc., Google parent Alphabet Inc., Facebook parent Meta Platforms Inc., and Tesla Inc.

While five out of the seven Big Tech stocks experienced gains from January 3, 2022, until now, Amazon and Tesla have seen a decline over the same period, as reported by DataTrek.

The unexpected rise of ChatGPT, a novel technology, played a significant role in pushing the S&P 500 to its current high. According to Colas, if one holds a bullish view (as we do), Friday’s breakout is an encouraging sign for what lies ahead.

Presently, the U.S. stock market is experiencing positive momentum, with the Dow Jones Industrial Average increasing by 0.3%, the S&P 500 gaining 0.3%, and the Nasdaq Composite rising by 0.4%, according to FactSet data at last check. The different sectors within the S&P 500 are showing mixed performance, with industrials and tech leading the gains in afternoon trading on Monday.

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