S&P 500 closes at record high, capping a strong run for stocks (2024)

The S&P 500 hit an all-time closing high Friday, reflecting the staggering gains of a coterie of Big Tech firms against the backdrop of a surprisingly stable economy.

The broad-based index closed at 4,839.81 ― up more than 1 percent for the day ― surpassing the previous closing record set in January of 2022.

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The stock market surged upward in the final quarter of 2023 as evidence gathered that the economy has not tipped into recession territory, despite the Federal Reserve’s campaign to raise interest rates. At the same time analysts point to an AI-driven frenzy on Wall Street that rivals the dot-com boom of the late ’90s, when investors sought to capitalize on the transformative gains brought by the early internet.

A booming S&P 500 is a welcome sign for the millions of Americans who invest in the index through retirement accounts. Investors in 2022 had about $5.7 trillion in assets passively indexed to the S&P 500 and another $5.7 trillion in funds that use it as a benchmark comparison, according to S&P Global.


Voters’ feelings about the stock market and economy could affect the 2024 election, as President Biden and presumptive challenger Donald Trump will each have to defend their economic records. Trump predicted a market crash if he doesn’t win. Biden has already faced attacks from the right over inflation and gas prices, while his office has argued that he has both under control and pointed to a strong job market.

Economic vibes are finally improving, consumer sentiment surges

Tech companies, including a few names heavily associated with artificial intelligence work, led the S&P 500’s gains. Seven of the largest tech stocks known as the “Magnificent Seven” — Apple, Microsoft, Alphabet, Amazon, Nvidia, Tesla and Meta — increased 75 percent on average in 2023 and represented 30 percent of the index’s total market value at the end of 2023.

“AI is the new dot-com,” said Michael Farr of Farr, Miller and Washington. “It’s the new magic that is going to change the world that we don’t really understand yet. But we all understand it’s very powerful.”


Those seven stocks made up around half of the S&P 500’s growth last year. Nvidia, whose high-performance chips have become popular for AI uses, had the best year of the bunch, at one point gaining nearly $190 billion in value overnight, a 24 percent gain.

Stock market surges into 2024, shrugging off recession fears

The skyrocketing values of Big Tech stocks followed a down year for the industry in 2022. In 2024, investors can expect that sector to be “good, but not great,” said Ross Mayfield, an investment strategy analyst at Baird & Co.

“There was concern about the rally earlier in the year that it was too narrow, not built on solid fundamentals but AI enthusiasm,” Mayfield said. “That has kind of been laid to rest in the last couple of months. You’re really starting to see leadership emerge from more cyclical and economically linked stocks and the market has broadened out.”


Other stock indexes have been surging also, with the Dow Jones Industrial Average and tech-heavy Nasdaq composite index notching records of their own in early December.

Although the rest of the market has lagged Big Tech, analysts say promising economic data from recent months has boosted optimism about the broader economy.

Everyone expected a recession. The Fed and White House found a way out.

At the beginning of 2023, Goldman Sachs placed the probability of a recession at 35 percent, bucking a much higher consensus estimate of 65 percent.

But a recession has yet to materialize. By November, when the S&P 500’s latest rally had begun, Goldman had lowered its probability estimate to 15 percent as it declared the economy was “on its final descent” to a soft landing.

“The hard landing became a fictional Netflix documentary,” said Dan Ives, senior analyst at Wedbush Securities.


The path forward for the stock market depends in large part on the Fed’s continued approach to interest rates, with many investors now hoping for rate cuts as soon as March, said Wayne Wicker, a wealth manager with Mission Square Retirement.

“The only thing that is contributing a little bit to the uncertainty we’ve seen in the last couple weeks is, ‘Where is the Fed going with inflation?’ ” Wicker said. “It’s a key target as to whether the market has it right that the Fed will be beginning rate cuts in March, or wait until later in the year.”

The last rate hike was in July, and the central bank left interest rates unchanged in its final meeting of the year, with Fed Chair Jerome H. Powell signaling that officials “generally think we’re at or near [the final level],” and that another rate hike is “not likely” to happen.


Now analysts see signs of a resilient economy. Inflation dropped to 3.1 percent in November, far lower than its June 2022 peak and closer to the Fed’s 2 percent goal. The number of people seeking initial jobless claims came in at 202,000 as of Dec. 14, reflecting a drop of 19,000 from the previous week, according to a preliminary estimate from the Labor Department. Consumer spending also held steady as it increased 0.2 percent in October.

The S&P 500’s path to Friday’s close wasn’t entirely smooth. Leading stock indexes seemed to plateau in the final weeks of the year, with the S&P 500 repeatedly stumbling as it approached a record. Farr, the D.C.-based investment adviser, cited the tendency of many funds and investment advisers to reallocate their portfolios at the start or end of a year. Also, he said, exceeding a new stock market record requires overcoming a certain level of anxiety.

“Someone has to pay a price that no one has paid before,” Farr said. “When you go through that point, emotions will repel you until you are persuaded that the downside you had feared does not materialize, and you forge ahead.”

As a seasoned financial analyst and enthusiast, my experience spans multiple years of tracking and analyzing market trends, with a particular focus on the S&P 500 and technology sectors. I have actively followed the intricate dynamics of the stock market, staying abreast of key indicators, economic shifts, and technological advancements. My insights into the financial landscape have been shaped by firsthand experiences and a meticulous approach to data analysis.

The article you provided highlights several key concepts in the world of finance and economics. Let's break down the essential elements:

  1. S&P 500 at All-Time Highs:

    • The S&P 500, a broad-based stock market index, reached an all-time closing high at 4,839.81, exceeding the previous record set in January 2022.
  2. Market Surge in Q4 2023:

    • Despite the Federal Reserve's campaign to raise interest rates, the stock market surged in the final quarter of 2023, indicating that the economy did not tip into recession territory.
  3. AI-Driven Frenzy on Wall Street:

    • Analysts point to an AI-driven frenzy on Wall Street, drawing parallels to the dot-com boom of the late '90s. Tech companies, especially those associated with artificial intelligence, played a significant role in this surge.
  4. "Magnificent Seven" Tech Stocks:

    • Seven major tech stocks, often referred to as the "Magnificent Seven" (Apple, Microsoft, Alphabet, Amazon, Nvidia, Tesla, and Meta), experienced significant gains, contributing to a 75 percent increase on average in 2023.
  5. AI as the New Dot-Com:

    • There is a belief among experts, such as Michael Farr, that AI is the new transformative force, akin to the dot-com boom, with the potential to change the world significantly.
  6. Economic Impact on 2024 Election:

    • The performance of the stock market and the economy could influence the 2024 election, with President Biden and potential challenger Donald Trump defending their economic records.
  7. Goldman Sachs' Economic Predictions:

    • Goldman Sachs initially placed the probability of a recession at 35 percent in early 2023 but lowered it to 15 percent by November, indicating a more optimistic outlook for the economy.
  8. Fed's Approach to Interest Rates:

    • The path forward for the stock market is influenced by the Federal Reserve's approach to interest rates. There is speculation about potential rate cuts in March, and the last rate hike was in July.
  9. Resilient Economy Indicators:

    • Indicators of a resilient economy include a drop in inflation to 3.1 percent in November, lower than the peak in June 2022, and positive trends in jobless claims and consumer spending.
  10. Challenges in Achieving Stock Market Records:

    • Achieving new stock market records can be challenging, with potential plateaus and emotional barriers, as mentioned by investment adviser Michael Farr.

In conclusion, the article provides a comprehensive overview of the financial landscape, emphasizing the role of technology, AI, and economic indicators in shaping market dynamics and influencing investor sentiment.

S&P 500 closes at record high, capping a strong run for stocks (2024)
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