S&P 500’s Winning Trio: The 3 Sectors That Ruled the Roost on the Road to Record Highs

According to a recent report by DataTrek Research, despite the S&P 500 achieving a new record high on Friday, the overall market rally has not been evenly distributed across sectors. DataTrek assessed the performance of different sectors over the approximately two-year period leading up to January 19, comparing it to the index’s previous peak on January 3, 2022.

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

Among these, energy saw the most substantial gains, around 40%, with technology standing out, according to DataTrek. It’s worth noting that information technology carries the largest weight in the S&P 500, making up about 30%, according to FactSet data.

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

DataTrek highlighted the outstanding performance of two mega-cap companies, Nvidia Corp. and Microsoft Corp., both reaching new highs on Friday within the S&P 500’s technology sector. Colas emphasized their impact, stating, “These two names account for 1.1 percentage points of the S&P 500’s 1.5% gain year to date. Without them, the index would not have reached 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, viewing the breakout as a positive signal 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, driven by advances in industrials and technology sectors.