What the Chiefs and Technology Stocks Have in Common! TWO SUPER CELEBRATIONS.

Despite the 5,000-point milestone, there’s caution that the S&P 500’s 20% rally since early November may hit a roadblock soon. (more on this in a minute).

The Fed kept its main interest rate at a 22-year high for a fourth straight meeting last week, and while officials signaled their openness to cutting them eventually, it won’t happen right away.

“The big driver for the rally is the realization that the US economy is unlikely to falter in the way that the average prognosticator had expected,” said Yung-Yu Ma, chief investment officer at BMO Wealth Management. “A better economy, healthy profits, and lower inflation are providing the fuel.”

Continued strength in the S&P 500 is making history.

• The S&P 500 closed at a fresh record high this week, gaining +1.37%. It’s only had one negative week since the October lows, rising +22% in that time.
• This was the fifth straight weekly gain of +1% or more. Since 1950, there have only been 11 other five-week streaks of +1% or more.
• The S&P 500 generally continued higher over the next few months, although 1956 and 1987 were notable exceptions.

Additional facts and figures on the S&P 500: (more on several of these shortly)

First Impressions Matter. In the 40 years since WWII when the S&P 500 was up at least 1.5% in January, its median performance for the remainder of the year was a gain of 13.4% with positive returns 82.5% of the time. In all other years, the S&P 500’s median gain was 5.7% with positive returns 66.7% of the time. (Source: Bespoke)

Lights Out. The Technology sector’s weighting in the S&P 500 ticked above 30% on 1/24 for the first time since 9/26/00. On the same day, the Utilities sector saw its weighting in the S&P 500 drop to a multi-decade low of 2.17%. Since 1990, the only time the Utilities sector’s weighting dipped below that level was in late March 2000 at the peak of the Dot Com Bubble. (Source: Bloomberg)

Does Share Price Matter? In the large-cap Russell 1,000, the 100 stocks that began 2024 with the lowest share prices fell an average of 7.4% in January, while the 100 stocks with the highest share prices rose an average of 2.0%.  Additionally, the 41 Russell 1,000 stocks that began the year with a $500+ share price rose 3.2% in January, while the 25 sub-$10 stocks fell 11.0%. (Source: Bespoke)

No Breaks. The S&P 500 has now rallied 21.3% over the last 70 trading days without experiencing even a 2% decline from a closing high. Since 1953, there have been 15 other streaks where the index went at least 70 trading days without a 2% decline. One year after those prior 70 trading day periods, the S&P 500 was up an average of 12.7% with gains 87% of the time. (Source: Bespoke)

Earnings Beats are Rallying. 72% of the more than 500 companies that had reported Q4 2023 earnings through February 7th reported stronger than expected EPS compared to a historical EPS “beat” rate of 65% over the last ten years. Stocks that beat EPS estimates have rallied more than 2% on the first trading day following their earnings reports this season, or about 50 basis points more than normal. (Source: Bespoke)