The S&P 500 is off to an impressive start: It's up $2.5 trillion in market value in just a few weeks. But that's primarily due to just a handful of stocks' big-time rallies.
Just 10 stocks in the S&P 500 — including Apple, Amazon.com and Tesla — account for half of the market's gain this year, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith.
Many of the year's biggest wealth generators are supersized. And much of the largest rallies this year are by S&P 500 stocks that lost the most ground last year. Many stocks hurt by the Fed's rate hikes are benefiting now that hikes may be winding down.
"Inflation is poised to ease further in the coming months, which will give the Fed some leeway to end its rate hiking campaign," said Jeffrey Roach, chief economist at LPL Financial. "History shows us that stocks typically rise after the end of a rate hiking cycle."
$2.5 Trillion Rally Is A Good Start
Yes, a $2.5 trillion rally in the S&P 500 is a welcome change. But it's just a quarter of the money lost in 2022. Stock markets dropped more than $10.4 trillion in 2022, says Wilshire Associates.
Nasdaq and technology stocks win from flat rates. When rates rise, investors value the here and now, like dividends, and less on the future, like technology companies' future profits.
But when rates stop rising, the opposite is true. The Nasdaq 100 is up 13% this year so far, after falling 33% in 2022. Meanwhile, the SPDR S&P Dividend ETF is up just 4.4%.
Where are the biggest gains coming from?
S&P 500 Technology Stocks Race Back
If you're looking for where much of the bounce is coming from, look no further than tech and the related communication services sectors.
Apple alone is responsible for adding $241.8 billion in market value this year. That means just this one stock accounted for 9.6% of all the value created in this rally. And half of the top 10 value creators this year are in technology. Together they contributed more than 23% of all the wealth made in this year's rally.
Communication services, which was the worst-performing S&P 500 sector, is no slouch either. Three of the top 10 wealth contributors in this year's rally are from the sector. As a group, they've pitched in more than 11% of the market's rally this year. And that's not just tech-related firms like Alphabet. Media companies are also contributing, like Walt Disney and its $48 billion in added value.
Tesla's 2023 Surge
It was easy to write off Tesla last year after it plunged 65%. But it's a whole different story this year.
Shares of Tesla are up 47% so far in 2023. That means Tesla alone added $184 billion, or 7.3%, of the S&P 500's value gain. On a percentage-gain basis, Tesla is in a class of its own among the big market value drivers in this year's rally.
But the electric-car icon is outshined by one consumer discretionary company in terms of market-value gain. Amazon is up 25% just this year, adding a Tesla-beating $215 billion to the S&P 500.
Critics can correctly point out that this year's rally is just a drop in the bucket against 2022's losses. But it's a big (and growing) drop.
Top S&P 500 Wealth Contributors In 2023 So Far
| Company | Ticker | Year-to-date gain | Market value gained (in billions) | Sector | % of 2023 rally |
|---|---|---|---|---|---|
| Apple | 11.9% | $236.1 | Information Technology | 9.6% | |
| Amazon.com | 25.2% | $215.8 | Consumer Discretionary | 8.8% | |
| Tesla | 47.3% | $183.9 | Consumer Discretionary | 7.5% | |
| Alphabet | 13.8% | $154.9 | Communication Services | 6.3% | |
| Nvidia | 43.3% | $155.8 | Information Technology | 6.3% | |
| Microsoft | 5.4% | $93.2 | Information Technology | 3.8% | |
| Meta Platforms | 27.2% | $86.0 | Communication Services | 3.5% | |
| Visa | 11.1% | $46.9 | Information Technology | 1.9% | |
| Walt Disney | 25.9% | $41.3 | Communication Services | 1.7% | |
| Salesforce | 29.6% | $38.9 | Information Technology | 1.6% |
Sources: IBD, S&P Global Market Intelligence
Follow Matt Krantz on Twitter @mattkrantz
