S&P 500’s Victory Lap: Meet the 3 Stock Sectors Dominating the 2-Year Rally

According to a report from DataTrek Research, although the S&P 500 achieved a record closing high on Friday, the overall market ascent has not benefited many sectors. DataTrek evaluated sector performances over the approximately two-year period leading up to January 19, comparing it to the index’s last peak on January 3, 2022.

Nicholas Colas, co-founder of DataTrek, remarked in a note sent on Monday, “The surge in the market to new highs has been selective, with only three groups showing gains since the S&P’s previous peak in early 2022.” Energy, technology, and industrials were the only sectors that experienced growth from the index’s previous record high in 2022 to its recent peak on Friday.

Among these, energy saw the most significant gains, approximately 40%, with technology being a standout performer, according to DataTrek. Notably, information technology holds the largest weight in the S&P 500, accounting for around 30%, as indicated by FactSet data.

Colas dismissed the significance of the energy sector’s rise, stating that its small weighting in the index, currently at 3.7%, makes it largely irrelevant. He explained, “Energy was in the doldrums two years ago, so its gains are understandable.”

DataTrek highlighted the remarkable performance of two megacap companies, Nvidia Corp. and Microsoft Corp., both achieving new highs on Friday within the S&P 500’s technology sector. Colas emphasized their impact, stating, “These two names are responsible for 1.1 percentage points of the S&P 500’s 1.5% gain year to date. Without them, the index would not have made its record close on Friday.”

The report also focused on the seven Big Tech stocks, including Apple Inc., Amazon.com Inc., Google parent Alphabet Inc., Facebook parent Meta Platforms Inc., and Tesla Inc. While five of these stocks contributed to the S&P 500’s 0.9% rise from January 3, 2022, through Friday, Amazon and Tesla saw declines over the same period.

Colas concluded on an optimistic note, drawing a parallel between the unexpected success of ChatGPT in 2022 and the promising breakout in the stock market on Friday. He expressed bullish sentiments, considering the breakout as a positive sign for the future.

As of Monday afternoon, the U.S. stock market showed gains, with the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite all posting increases, led by industrials and technology sectors.

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