The S&P 500 Index has surpassed the $4,000 threshold
A rebound in technology stocks, combined with growing optimism about the global recovery, propelled the world’s most important stock index above $4,000 for the first time.
The S&P 500 Index soared as much as 0.7% to a record as investors assessed President Joe Biden’s new $2.25 trillion stimulus plan ahead of Friday’s U.S. employment report, which is expected to report the fastest pace of hiring in five months. While it took nearly five years for the index to rise from $2,000 to $3,000 in July 2019, the most recent $1,000 gain took about 21 months.
The recent rise in the S&P 500 has been largely fueled by a surge in energy and financial stocks as vaccine implementation accelerates. This has pushed Treasury yields higher and raised inflation expectations, sending cyclical stocks – those that are more sensitive to economic swings – higher. However, a slowing of the bond selloff’s ferocious pace has given new life to tech stocks, the benchmark’s largest sector, which has struggled as interest rates have risen.
The S&P 500 Index is up 6.5% in 2021, with the energy and financial sectors up 29% and 15%, respectively, year to date. As the once-relentless stay-at-home stocks fade, the benchmark has outperformed the tech-heavy Nasdaq 100’s 1.6% gain this year.
Nevertheless, due to the prevalence of technology stocks in the S&P 500, it’s unclear how far the index can rise if the sector falls too far behind. Tech stocks account for nearly 27% of the index, while financials and energy combine for 14.1%.
Stocks Reach All-Time Highs
Stocks in the United States reached new highs as the increased stimulus in the world’s largest economy fueled optimism about the global recovery. Oil rose as OPEC and its allies prepared for an online meeting to discuss production cuts.
Traders are going head to head in before the Easter weekend after data revealed that private employers in the United States hired the most workers in six months, while initial jobless claims unexpectedly increased. Even though Republican opposition to Biden’s ambitious plan to rebuild U.S. infrastructure raises questions about how much can actually be delivered, the plan has added to the growth outlook.
As central banks reaffirm their commitment to low-interest rates, investors remain focused on inflation risk. For the time being, traders are looking past worsening virus trends, such as lockdowns in France and Ontario, Canada.
The economic calendar for the end of the week:
- U.S. employment report for March on Friday.
- The Easter weekend in countries including the U.S., U.K., France, Germany, Australia, and Canada.