From Nasdaq:

The S&P 500 stock index reached a record high on Friday in hopes of lower interest rates and resilient growth in 2024, reflecting an optimistic market on the back of chipmakers and big technology stocks.

Stocks became volatile in early 2022 over fears of rising consumer prices driving Fed to raise interest rates. Stock index plummeted 25% hitting its bottom in October before a year-end rally, ending 2023 with a 24% increase.

Lowered expectations of rate cuts in the year 2024 have led to decreased Treasury yields. The benchmark 10-year Treasury yield US10YT=RR hit 5% on October supported by investors recalibrating bets on Fed’s future moves.

The U.S. economy continues to exhibit resilience while showing strength in retail sales and consumer sentiment. Economic Surprise Index .CESIUSD turned negative in early 2024 for the first time since May, portraying a cooling trend.

Shares of the Magnificent Seven including Apple, Microsoft, and Amazon were up by about 50% to 240% in 2023, responsible for two-thirds of the S&P 500’s total return last year, leading to a crowded market. The seven stocks were traded at an average of about 33 times expected earnings, significantly higher than the overall S&P 500.

The S&P 500’s forward price-earnings ratio is hovering near 20 times, surpassing the historical average of 15.6 times. It poses a challenge for positive earnings surprises and market returns this year due to high valuations.



Read more: GRAPHIC-The S&P 500’s wild ride to an all-time high