U.S. Stocks Reach New Highs in Multiple Sectors

According to Bespoke Investment Group, the recent rally in U.S. stocks has seen a majority of the S&P 500's sectors closing at 52-week peaks simultaneously. This is a significant development, as it is the highest share of sectors reaching these highs since May 2021.

Based on data going back to 1990, it is "fairly uncommon" for the majority of the index's sectors to reach such peaks at the same time. This demonstrates the current strength and breadth of the stock market, which stands in contrast to much of 2023, where gains were driven by "narrow leadership."

The information-technology, communication-services, and consumer-discretionary sectors have been leading the S&P 500's gains this year. FactSet data shows that the index has surged around 23% so far, fueled by the impressive performance of megacap stocks. These stocks, referred to as the Magnificent Seven or Big Tech, include Nvidia Corp., Facebook parent Meta Platforms Inc., and Tesla Inc., which have seen substantial gains.

Nvidia Corp. has skyrocketed around 232% this year, while Facebook parent Meta Platforms Inc. has soared around 191%, and Tesla Inc. has surged around 103%. Even Google parent Alphabet Inc. is among the top-performing stocks in the S&P 500, with a gain of around 1.8%.

However, on Wednesday afternoon, the S&P 500 experienced a 1.2% decline, following Tuesday's close, which was only 0.6% below its record close reached in early January 2022.

Despite recent fluctuations, seven out of the index's 11 sectors have shown gains so far this year. Only consumer staples, energy, utilities, and healthcare sectors have seen losses year-to-date.

While historically, a majority of S&P 500 sectors hitting new 52-week highs on the same day have been followed by weaker-than-average returns in the near term, Bespoke Investment Group suggests that returns in line with historical norms can be expected over the longer term.