Evolution of the S&P 500: Beyond the Magnificent 7 to Record Highs

Throughout the first quarter, more stocks participated in the market rally, offsetting some of the weakness observed in Big Tech. Analysts anticipate this trend to persist.

Individual stocks contributed to the strength of the S&P 500 index, dispelling concerns about narrow market gains. Recent data shows that the number of S&P 500 stocks hitting 52-week highs reached its highest level in three years, indicating a broadening market.

Additionally, an increasing number of index members are showing long-term uptrends, with over 83% trading above their 200-day moving average, marking the highest level since August 2021.

While the dominance of Big Tech has waned since 2023, major tech stocks still made significant contributions to the index’s rise this year, albeit less than before.

The “Magnificent Seven,” comprising major tech companies, contributed 37% of the S&P 500’s first-quarter gains, down from two-thirds in 2023. However, excluding Apple, Tesla, and Alphabet, the remaining four members—Nvidia, Microsoft, Meta Platforms, and Amazon—contributed a substantial 47%.

Despite challenges faced by Apple and Tesla, other sectors such as industrials, financials, and energy have picked up the slack. These sectors, alongside information technology and communications services, outperformed the S&P 500 in the first quarter, reflecting a diversified market rally.

As the Federal Reserve considers interest rate cuts, portfolio managers anticipate mid- and small-cap stocks to regain momentum, particularly with cyclical sectors like financials and industrials reaching record highs.

Looking ahead, analysts are closely monitoring the release of the March nonfarm payrolls report for further insights into the market’s direction.

In March, both the Dow Jones Industrial Average and the S&P 500 achieved record highs, reflecting the overall bullish sentiment prevailing in financial markets.