The S&P 500 closes above the key 5,000 level for the first time

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The S&P 500 closed above the 5,000 level on Friday for the first time as bullish sentiment spread across Wall Street and investors cheered on new data showing progress in inflation.

This historic moment comes during a period of strong economic growth, the artificial intelligence revolution, a better-than-expected earnings season, and an expectation of a shift from the Federal Reserve to start cutting interest rates.

The S&P 500 briefly crossed the 5,000 mark for the first time during the day Thursday.

The S&P 500 took nearly 41 years to reach its first major milestone of 1,000, which it reached on February 2, 1998, according to Howard Silverblatt, chief index analyst at S&P Dow Jones Indices.

The index reached its previous major milestone of 4,000 on April 1, 2021, after the Federal Reserve cut interest rates to nearly zero, the government pumped stimulus money into the economy and the COVID-19 vaccine fueled optimism for post-pandemic economic growth.

On January 19, the benchmark index set a new record high for the first time in two years, closing at its previous high of 4,796.56, which it reached on January 3, 2022, surpassing that level. The index continued to record six new record highs in January alone.

When the S&P 500 hits a new high in January, CFRA Research’s Sam Stovall finds, it hits new highs in February about 75% of the time. When new highs are made in both months, the index generated an average return of about 16% and ended the year higher about 88% of the time, he said.

The S&P 500 is up about 5.4% so far this year. The index jumped 24% in 2023, with stocks rising strongly at the end of the year as optimism grew that the Fed could achieve a soft landing, or lower inflation, without causing an economic slowdown.

Big tech companies are leading the way

The advance to new heights has been very narrow – most of the S&P 500’s gains come from the so-called “Big Seven” – Nvidia, Microsoft, MetaPlatforms, Amazon, Apple, Alphabet and Tesla.

Shares of Nvidia, Microsoft, Meta Platforms, and Alphabet closed at their own record highs several times last month.

“Ideally, when the stock market is trading higher, many sectors and stocks participate,” Scott Wren of the Wells Fargo Investment Institute said in a note on Wednesday.

Returns on Magnificent Seven shares paid out about 62% of the benchmark index’s total return of 26% last year, according to Silverblatt.

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