Evolution of S&P 500 Gains

A handful of megacap technology names were responsible for most of the S&P 500’s gains over the past year, but recent trends suggest a shift in market dynamics for 2024.

The Magnificent Seven Stocks

The so-called Magnificent Seven stocks, including chip maker Nvidia Corp. NVDA, have maintained their lead in the S&P 500 rally since the beginning of the year. However, data indicates a broader participation from the rest of the market, with over 60% of stocks in the index showing year-to-date gains. This improvement points to a more widespread positive market sentiment.

Strength in Market Breadth

An indicator of strong market breadth is the number of stocks hitting 52-week highs. Recently, 106 S&P 500 components, accounting for 21.2% of the index, reached new 52-week intraday highs. This marked the highest single-day reading since May 10, 2021, signaling a notable momentum in the market.

Consistent Positive Trend

The S&P 500's streak of sessions with more stocks hitting 52-week highs than lows extended to 85 trading days on Monday, highlighting a consistent positive trend. Achieving a 52-week high is often seen as a bullish sign, reflecting positive momentum and investor confidence in the market.

Sector Performance

In terms of sector performance, the industrials and materials sectors within the S&P 500 have shown a notable increase in the number of stocks reaching 52-week highs in 2024. This steady growth indicates a positive outlook for these sectors moving forward.

Overall, the evolving landscape of the S&P 500 in 2024 reflects a more inclusive market rally, with a diverse range of stocks contributing to the overall gains.

Market Activity Analysis

According to Bespoke analysts, on Monday, an impressive 42% of stocks in the industrials sector and 30% of stocks in the materials sector hit their highest levels in at least a year. This data is a clear indicator of the current market trends and potential opportunities for investors.

Sector Performance

Last month, the industrials and materials sectors surpassed the information-technology sector by a narrow margin, as reported by FactSet data. Continuing into March, these two cyclical sectors have maintained their outperformance over technology stocks, boasting gains of 0.3% and 1.1%, respectively. In contrast, consumer-discretionary, communication services, and information-technology sectors have experienced declines of 2.1%, 1.6%, and 0.7% during the same period, based on FactSet data.

Market Concentration Concerns

The recent unyielding rally in the "Magnificent Seven" stocks has triggered some concerns among investors regarding market concentration. However, analysts at Bespoke believe that this group of stocks is now transitioning to a new phase.

Sector Highs

While nearly 30% of information-technology sector stocks hit 52-week highs on Monday, this figure was slightly lower than Friday's peak of 34%. Moreover, only 23% of consumer-discretionary sector stocks achieved new highs on Monday, indicating a notable decline compared to previous highs recorded in mid-December.

Current Market Trends

On Tuesday afternoon, U.S. stocks experienced a decline, with tech shares facing challenges following a recent rally that raised concerns about high valuations. The S&P 500 dropped by 0.9% to 5,085 points, while the Nasdaq Composite decreased by 1.7%, and the Dow Jones Industrial Average was down by 0.8%, according to FactSet data.