The S&P 500 Index, a widely-followed gauge of the U.S. stock market, achieved a fresh all-time high Friday. The index reached a level of 4,826 during intraday trading, surpassing previous peak levels seen over two years ago on Jan. 4, 2021.
Similarly, the SPDR S&P 500 ETF (NYSE:SPY), which closely mirrors the index’s performance, marked a new all-time high of $481 on Dec. 19.
Other ETFs tracking the S&P 500, such as the iShares Core S&P 500 ETF (NYSE:IVV) and the Vanguard S&P 500 ETF (NYSE:VOO), also achieved new highs of $483.29 and $441.98, respectively.
The S&P 500 is up 18% since its October 2023 lows and 23% compared to the same day last year.
The broader U.S. stock market is on course to conclude its 11th positive week out of the last 12, highlighting the impressive winter rally.
Chart: S&P 500 Sets New Record Highs
Key Drivers Behind The Surge
Three key dynamics have fueled U.S. stocks over the last quarter:
Tech stocks’ impressive performance.
Inflation coming down, economy holding up.
Markets pricing Fed rate cuts.
Tech Stocks Drive The Rally
Technology stocks have been the driving force behind the surge of the S&P 500 to new all-time highs. The technology sector carries a significant weight of 30% within the S&P 500, and when combined with communication services stocks, their collective weight approaches nearly 40%.
With the Nasdaq 100 Index also reaching record highs and tech stocks outperforming the overall market, the S&P 500 experienced upward pressure.
Remarkably, an equally-weighted index comprising the “Magnificent Seven,” which includes companies like Apple Inc. (NASDAQ:AAPL), Microsoft Corp. (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOG) (NASDAQ:GOOGL), Amazon Inc. (NASDAQ:AMZN), Meta Platforms Inc. (NASDAQ:META), NVIDIA Corp. (NASDAQ:NVDA), and Tesla, Inc. (NASDAQ:TSLA), has surged by an impressive 110%.
A significant contributing factor to the broader tech rally has been the ascension of artificial intelligence. Within this context, the semiconductor industry has emerged as the standout performer, driven by surging demand for chips.
Inflation Falls, Consumers Show Resilience
The U.S. inflation rate has experienced a significant decline since reaching its peak in June 2022. In December, the annual inflation rate stood at 3.4%, nearly half the increase…
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