S&P 500 Sees Uptick Despite Tech Sector's Decline

Despite the S&P 500 Being In a Bear Market, a More Detailed Analysis Reveals That the Majority Of Its Stocks are Experiencing a Strong Surge.

‍
The benchmark has dropped 17% from its peak on January 3, 2022, however, data from Bloomberg shows that the majority of stocks in the index have increased by 20% or more from their 52-week lows. Wynn Resorts and Boeing Co. have been particularly successful, with both stocks rising over 60% in the last three months.

‍
The S&P 500 has not been performing as well as expected, and the reason for this can be attributed to the poor performance of a few technology-related stocks. These stocks have a large market capitalization, which gives them a greater influence on the index. Apple Inc., Amazon.com Inc., Tesla Inc., Microsoft Corp. and Meta Platforms Inc. are the five stocks that are responsible for almost half of the S&P 500's losses in the last year.

‍
Apple and Microsoft, both with market values of around $2 trillion, have a combined influence of more than 11% in the S&P 500. This is more than all the energy, materials and utilities companies in the benchmark. Therefore, even though American Airlines Group Inc. has seen a 34% increase this year, its 0.03% weighting has little effect on the index's growth.

‍
Market professionals are keeping an eye on a version of the S&P 500 that gives all stocks an equal weighting to gain a better understanding of the equity market. This index has been outperforming the S&P 500 by the most since 2019 and has risen 17% since reaching a low point on September 30th.

‍
Dan Wantrobski, director of research at Janney Montgomery Scott, believes that the equal-weighted index is essential to monitor due to its ability to provide a more comprehensive look into the overall recovery. He stated, “This gives us more assurance that stocks should remain stable this year.”

‍
The stock market has seen a surge in the first two weeks of the year due to the belief that the Federal Reserve will reduce its interest rate hikes as inflation slows. This week, the S&P 500 rose by 2.7% after the government reported that consumer prices had grown at the slowest rate in over a year in December.
Communication and consumer discretionary stocks have been some of the top performers in the S&P 500, with Warner Bros Discovery Inc., United Airlines Holdings Inc. and Carnival Corp. all seeing gains of more than 20%.

‍
Phil Blancato, the CEO of Ladenburg Thalmann Asset Management, believes that strength in industries outside of technology is beneficial for the average investor. He expressed in an interview that having a diversified portfolio can reduce risk and provide a chance to do better than the average. He also noted that diversifying is more advantageous than focusing on one area.

‍
Investors have become more willing to take risks in anticipation of a less restrictive Federal Reserve, which has caused some of the worst performing stocks of 2022 to rise. Amazon, for example, has increased by 17% in the first nine days of trading this year. Not all tech stocks have seen the same success, however, as Apple and Microsoft have yet to match the S&P 500's performance.

‍
Investors have shifted their focus to the start of earnings season, which began on Friday with reports from JPMorgan Chase & Co. and Wells Fargo. The market's reaction to the results from the two largest US banks was not overly positive. The Federal Reserve's next interest rate decision is due on February 1st and the market is expecting a 25 basis-point increase, which is lower than the 50 basis-point hike in December.