The S&P 500 Index is on track to close at its first record since January, as traders bid up stocks amid optimism over the ceasefire between the US and Iran and robust corporate fundamentals.
The S&P 500 climbed 0.2% on Wednesday, surpassing its previous closing high of 6,978.60 points, with financials and technology sectors leading the advance. The 500-member gauge hovered near a technical correction zone in late March as the Iran war pushed up oil prices and inflation expectations.
The advance represents a stark turnaround for the gauge, which had fallen as much as 9.1% from its most recent peak. Technology companies Intel Corp. and Sandisk Corp. have gained at least 50% since the index’s March 30 low.
Signs of easing tensions in the Middle East, combined with optimism over the artificial intelligence technology and corporate earnings — the cornerstone of US equities’ bull-market run — have pushed skeptics to abandon their cautious views. The benchmark gauge has rallied in nine of the past 10 days.
“It’s difficult for investors to avoid the fear of missing out,” said Matt Maley, chief market strategist at Miller Tabak + Co. “It reinforces the whole buy-the-dip mentality that has worked so well the last few years.”
Investors have piled into stocks on hopes over another round of talks between the US and Iran after more than a month of fighting created upward pressure on oil prices and inflation expectations. The US and Iran are closer to extending a ceasefire and restarting negotiations about a longer-term peace deal, the Associated Press reported on Wednesday, even as a standoff intensifies over the Strait of Hormuz.
Risk-on momentum among algo-driven funds, who had previously slashed equity exposure to multiyear lows, likely played a role in pushing the stock market higher. The so-called systematic investors are poised to deploy a record amount into US equities, Goldman Sachs Group Inc. traders wrote in a note to clients earlier in April.
Tech stocks, in particular, have seen sharp gains since the ceasefire agreement. Coherent Corp., which supplies equipment to semiconductor makers, has risen 25% since the agreement was reached on April 7.
The Philadelphia Semiconductor Index, which includes mega-cap names such as Nvidia Corp., Broadcom Inc. and Micron Technology Inc. returned to record highs after the ceasefire announcement in early April. The Nasdaq 100 Index of technology megacaps has gained 13% since late March and is 0.9% away from its October record.
The strength has not been universal across the market. An equal-weighted version of the S&P 500 Index, which makes no distinction between a behemoth like Microsoft Corp. and relative minnow like News Corp., is still 2.4% away from its February record.
Still, to Jonathan Krinsky of BTIG LLC, easing tensions in the Middle East coupled with the stock market’s advance past its key support levels are conducive to supporting the rally.
“People are definitely going to get more constructive,” Krinsky, chief market technician at the firm, said of the S&P 500 regaining its record high. “There’s a variety of signals that suggest we’re not going to go back and re-test the lows at this point.”
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