The S&P 500 notched its first record high since Aug. 13 on Tuesday, powered by a resurgent "Magnificent Seven" group of megacap tech stocks whose combined market value topped $25 trillion for the first time. Nvidia's market cap climbed above $6 trillion as investors rotated back into the biggest tech names to shelter from rising bond yields.
On Tuesday, the S&P 500 was on track to tally its first record high since Aug. 13, according to Dow Jones Market Data. Between the previous record and Tuesday, the index had largely leaned on a handful of megacap stocks for gains, a familiar dynamic that helped define the earlier stages of the current rally.
Magnificent Seven top $25 trillion
Led by Nvidia and Meta Platforms, the Magnificent Seven group was on pace to close Tuesday with a combined market capitalization above $25 trillion for the first time, Dow Jones Market Data showed. The Nasdaq composite and an ETF that tracks the Magnificent Seven were both set to notch a second straight record closing high.
Nvidia, the world's most valuable public company, was on track for its market capitalization to pass $6 trillion for the first time. These megacap names had struggled earlier in the year, with even Nvidia trading sideways for months, while semiconductor and industrial stocks tied to the data-center build-out rallied instead.
Rate pressure drives the rotation
Fortunes turned in July, as investors reversed out of the earlier AI-momentum trade and back into megacaps and hard-hit software names. Then, starting in August, software, semiconductors and megacaps began moving higher together as the sector became the preferred shelter from the Federal Reserve's tightening path. According to MarketWatch, Mike Dickson, head of research and quantitative strategies at Horizon, said: "It's been a bit of a catch-up trade, frankly."
Rising bond yields had pressured small caps, utilities and home builders, sectors considered particularly sensitive to interest rates. At the same time, worries over high energy prices tied to the conflict in Iran weighed on financials and consumer-discretionary shares. The Fed delivered its first interest-rate hike in three years in September, and interest-rate futures markets point to another hike before year-end.
Breadth shows signs of improving
The narrowness of the rally has frustrated some investors, but there have been signs that breadth is making a comeback. On Tuesday, 10 or more of the S&P 500's 11 sectors were on track to finish in the green for a third straight session for the first time since December 2023. The number of S&P 500 stocks hitting new 52-week highs was also on track to outnumber those hitting new 52-week lows for the first time in about a month.
Source: MarketWatch
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