S&P 500 Achieves Record Close in Over Two Years
The S&P 500 index reached a significant milestone on Friday, achieving its first record close in more than two years. After a month of trading within a narrow range, the large-cap benchmark index finished at 4,839.81, surpassing its previous record close of 4,796.56 set on January 3, 2022. The index also reached a new intraday record of 4,842.07, surpassing its previous high of 4,818.62 set on January 4, 2022.
This breakthrough comes after a volatile start to the year for stocks, which analysts attribute to rising Treasury yields and uncertainty surrounding a potential interest-rate cut by the Federal Reserve in March. The S&P 500’s record close also ended a streak of 512 trading days without a fresh high, marking the longest such stretch since October 2007 to March 2013.
The new year began with U.S. stocks experiencing a downward trend, pulling back from near-record highs due to solid economic data and pushback from Federal Reserve officials against market expectations of aggressive rate cuts. These factors created uncertainty over the path of monetary policy in 2024 and drove longer-term Treasury yields to their highest levels since December.
Throughout December and January, the S&P 500 remained within a short-term trading range, with an intraday level of around 4,700 on the downside and slightly above 4,800 on the upside. However, the index failed to reach a close above its previous record high during this period.
Steve Sosnick, chief strategist at Interactive Brokers, explains that it is normal for stocks to encounter resistance when approaching a record high. He believes that the optimism surrounding artificial intelligence and fourth-quarter earnings will outweigh concerns about the pace of interest rate cuts by the Federal Reserve. Sosnick predicts that record highs for the S&P 500 will attract more people to the market, as traders tend to buy when they see market prices breaking out.
Mark Arbeter, president of Arbeter Investments LLC, notes that there is no significant short-term technical damage to the major indexes. However, he also sees evidence mounting for a potential pullback or correction, as some major indexes are at or near their all-time highs. Arbeter points to indicators such as the VIX term structure, which suggests complacency in the market and often precedes trouble.
Despite these concerns, historical data from Ned Davis Research shows that a return to record territory after a gap of at least a year has historically led to positive returns a year later. Strategists Ed Clissold and London Stockton of Ned Davis Research believe that the recent rally to new highs indicates a breakout to a new up leg rather than an overbought market in need of a correction.
The positive sentiment in the market was reflected in Friday’s trading, with the Dow Jones Industrial Average closing at a record high of 37,863.80, its second of the year. The Nasdaq Composite also advanced by 1.7%. For the week, the S&P 500 jumped 1.2%, the Dow industrials rose 0.7%, and the Nasdaq Composite surged 2.3%.
Overall, the S&P 500’s record close signals a renewed sense of optimism in the market. While concerns about interest rate cuts and potential market corrections persist, historical data and positive economic indicators suggest that the current rally may be the start of a new upward trend. Investors and traders are eagerly watching to see if this momentum will continue in the coming weeks and months.