The Magnificent 7 Are No Longer the Only Stocks Driving the S&P 500 to Record Highs

During the first quarter, a broader array of individual stocks contributed to propelling the S&P 500 index to unprecedented highs, effectively refuting skeptics' concerns regarding the sustainability of the market's ascent.

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Data provided by Ryan Detrick from Carson Group to MarketWatch revealed that the number of S&P 500 stocks hitting 52-week highs recently surged to 118, marking the highest level in three years and indicating a notable improvement in market breadth.

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Additionally, more index constituents are embarking on long-term uptrends, with over 83% trading above their 200-day moving average as of Thursday, the highest proportion since August 2021, according to Dow Jones Market Data.

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Despite the increasing participation of individual stocks in the market rally, investors have not entirely relinquished their interest in Big Tech. Data suggests that mega-cap technology stocks have continued to make significant contributions to the index's advancement this year, albeit with diminished influence compared to 2023.

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Collectively termed the "Magnificent Seven," these tech giants were accountable for 37% of the S&P 500's 10.2% gain in the first quarter, as per Howard Silverblatt, a senior index analyst at S&P Global Indices. While this contribution is lower than in the previous year, excluding Apple Inc., Tesla Inc., and Alphabet Inc. from the equation inflates the remaining four members' contribution to 47%.

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However, the performance of the Magnificent Seven seemed to falter in March, as they underperformed the broader index by the most since December. Despite this, the S&P 500 still logged its 22nd record closing high of 2024 on the final trading day of March.

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As the influence of Big Tech diminishes, cyclical sectors such as industrials, financials, and energy have stepped up to fill the void. These sectors, along with information technology and communications services, outpaced the S&P 500 during the first quarter, signaling a shift from the previous year.

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Analysts view the expanding market leadership positively, particularly as various cyclical sectors reach record levels. The record-breaking performances of financials, industrials, materials, and healthcare stocks, along with the sustained strength of information technology stocks, are regarded as bullish indicators.

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Looking ahead, some portfolio managers anticipate mid- and small-cap stocks to regain momentum, particularly as the Federal Reserve contemplates interest rate cuts. While the S&P Mid Cap 400 index has already achieved record highs, small-caps have yet to catch up, although signs of progress are evident.

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The upcoming release of the March nonfarm payrolls report from the Labor Department is anticipated to provide further insights into the market's trajectory. Economists expect the creation of 200,000 jobs, slightly lower than the previous month's figure.

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In March, the Dow Jones Industrial Average and the S&P 500 both achieved record highs, underlining the market's resilience and optimism.

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