Optimism about the U.S. economy sends stocks to a new record

VPM | By David Gura

Published February 9, 2024 at 2:30 PM EST

The S&P 500, a broad-based index of stocks, broke above 5,000 for the first time ever.

Stocks are on a record-setting run.

For the first time in history, the S&P 500, the broad-based U.S. index of the largest and best-known companies in the world, is above 5,000.

The S&P 500 opened over the milestone mark at the opening bell on Friday. This comes a day after it touched the level for a brief moment before settling lower.

“Investors are feeling optimistic that we have sidestepped a recession,” says Sam Stovall, the chief investment strategist at the financial research firm CFRA.

The latest economic data seem to indicate the Federal Reserve is getting close to executing a so-called “soft landing” for the U.S. economy. That’s despite widespread fears of a recession last year, when the Fed raised interest rates aggressively to fight high inflation.

The S&P 500 is up more than 5% so far this year, on the heels of a strong year when the index gained 24%.

Lower interest rates will juice the economy further

Even then, some professional investors downplay the significance of milestones.

“I think it’s a psychological threshold,” says Stovall, noting that Wall Street has a fondness for round numbers, and investors see these “millennial levels” as key milestones.

Investors believe policymakers are comfortable enough with the progress they’ve made and will soon start cutting interest rates.

That would juice the economy because it would make it less expensive for everyone — companies included — to borrow money, and investors would also feel more comfortable making riskier bets.

Beyond that, hundreds of companies have updated Wall Street in recent days on their financial performance, and many of them performed better in the final three months of 2023 than analysts expected.

According to Stephen Suttmeier, the chief equity technical strategist at Bank of America, the stock market rally has been strong, but narrow. The strength of a handful of companies have powered the major indices — the S&P 500 among them — higher.

The Magnificent Seven continues to outperform

Last year, a group of stocks nicknamed “The Magnificent Seven” accounted for most of the broader market’s gains, and most of those well-known companies — Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla — have continued to outperform.

Year to date, shares of Nvidia, which designs high-end microchips for most of the computers that power artificial intelligence, are up about 45%.

“It’s a couple growth sectors, and that’s it,” says Suttmeier. “What’s leading the market is still more growth-y, tech-y stocks.”

And if you dig deeper, most of these companies are in the communication services and information technology sectors, which are beating the broader market.

So, where does the market go from here? It took 34 months — or slightly less than three years — for the S&P 500 to go from 4,000 to 5,000.

“If you look at the history, my guess is we spend some time above 5,000, probably spend some time below 5,000,” Suttmeier says. “And I think we can actually move well beyond 5,000.”

But he’s of the belief, like many Wall strategists, that this rally needs to broaden to continue moving higher.

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David Gura

Based in New York, David Gura is a correspondent on NPR's business desk. His stories are broadcast on NPR's newsmagazines, All Things Considered, Morning Edition and Weekend Edition, and he regularly guest hosts 1A, a co-production of NPR and WAMU.

Previously, Gura was a correspondent for NBC News and an anchor for MSNBC. His reporting aired on NBC Nightly News and TODAY, and MSNBC's dayside and primetime programs, including The 11th Hour, Deadline: White House and MTP Daily.

Gura travels widely across the United States and around the world. In recent months, his reporting has centered on the COVID-19 pandemic and its economic fallout. In Texas, he covered a surge in cases that strained Houston's hospitals. On the eve of an eviction crisis in Oklahoma, Gura profiled people who had waited months for jobless benefits.

He has anchored special coverage, often from the field. During Hurricane Dorian, he broadcasted live from the Outer Banks in his home state of North Carolina. Gura reported from Virginia Beach, Virginia, after a mass shooting at the city's municipal complex, and from El Paso, Texas, after an attack on shoppers at a Walmart Supercenter. After a gunman targeted the Tree of Life – Or L'Simcha Congregation, Gura anchored MSNBC's coverage from Pittsburgh.

For almost two years, he hosted Up with David Gura on MSNBC, a lively roundtable that aired on Saturday and Sunday mornings, featuring a motley group of guests, including lawmakers, reporters, columnists, strategists, actors and comedians. During the 2020 primary, Gura interviewed many of the Democratic presidential candidates, and he took the show on the road to the Texas Tribune Festival.

Before he joined NBC News and MSNBC, Gura was a correspondent for Bloomberg Television and Bloomberg Radio, and a contributor to Bloomberg Businessweek. He co-anchored Bloomberg Surveillance, the network's flagship morning program, and after the 2016 election, he launched Bloomberg Markets: Balance of Power, which focused on the intersection of politics and policy.

Previously, Gura was a senior reporter for Marketplace, the public radio business and economics program, and its primary back-up host. From the organization's Washington bureau, he covered budget battles, showdowns and shutdowns and the implementation of financial reform, and he also spent a lot of time on the road, looking at how legislation and regulations affect Americans beyond the Beltway.

Gura's writing has appeared in The New York Times, the Los Angeles Times, the Columbia Journalism Review and the Virginia Quarterly Review. He has been recognized by the National Press Foundation, the National Constitution Center and the French-American Foundation, and he is a term member of the Council on Foreign Relations.

An alumnus of the Columbia University Graduate School of Journalism, Gura received his bachelor's degree in history and American studies, with honors, from Cornell University in Ithaca, New York. He also studied political science in La Paz, Bolivia, at the Universidad Mayor de San Andrés and the Universidad Católica Boliviana.

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