Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Big Tech drives S&P 500 to record high in coronavirus rally

Published 18/08/2020, 18:00
Updated 18/08/2020, 18:20
© Reuters. The New York Stock Exchange building is seen past a statue of George Washington on the steps of Federal Hall on Wall Street in Lower Manhattan in New York

© Reuters. The New York Stock Exchange building is seen past a statue of George Washington on the steps of Federal Hall on Wall Street in Lower Manhattan in New York

By Noel Randewich

(Reuters) - The S&P 500 hit a record high on Tuesday, thanks largely to months of outperformance from Amazon (NASDAQ:AMZN) and other heavyweight technology companies viewed by investors as likely to emerge from the coronavirus crisis stronger than smaller rivals.

The widely followed index's most valuable companies have surged this year, with Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT) and Amazon each up between 33% and 72% year to date.

Graphic: Big Tech gets bigger Big Tech gets bigger https://graphics.reuters.com/USA-STOCKS/FANG/oakveogzyvr/chart.png

ABIOMED, Regeneron Pharmaceuticals and West Pharmaceutical Services, all involved in developing and selling therapies for the coronavirus, have risen over 50% since the S&P 500's previous record high in February.

Trillions of dollars of monetary and economic stimulus aimed at reducing the economic fallout for tens of millions of Americans out of work because of the coronavirus have driven the S&P 500 up more than 50% from its March 23 low, with the benchmark now up nearly 5% for 2020.

Graphic: S&P 500 vs unemployment https://fingfx.thomsonreuters.com/gfx/mkt/yzdvxxyoxvx/Pasted%20image%201597765514650.png

While the pandemic has forced many restaurants and shops out of business, large supermarkets and retailers with strong online sales have grown. Thanks mostly to Amazon, the S&P 500 consumer discretionary index has gained 23% in 2020, making it the second-strongest performer among 11 sector indexes, below technology.

The information technology index has jumped 25% year to date, lifted by Microsoft, Apple, Mastercard (NYSE:MA) and other companies seeing stronger demand for their products and services as people staying at home do more shopping online.

While some investors worry that the rally since March has been concentrated largely among tech companies, others have confidence that these stocks' gains are justified as the pandemic leads to a sharp increase in online shopping, cloud computing and other uses of technology.

"These are firms that have solid fundamentals that are superior to the broader market and will benefit from recent trends. We do not find that this high concentration is a source of systemic risk,” said Benjamin Jones, senior multi-asset strategist at State Street (NYSE:STT) Global Markets.

Graphic: S&P 500 sectors year to date https://fingfx.thomsonreuters.com/gfx/mkt/qmyvmamnovr/Pasted%20image%201597765106160.png

With the U.S. corporate earnings season mostly completed, a record number of companies have beaten dramatically lowered estimates. But the second quarter is still set to be the low point for earnings this year.

Even after a recent modest improvement in profit estimates, the S&P 500 is trading at about 22 times expected earnings, its highest multiple since the dot com era two decades ago.

© Reuters. The New York Stock Exchange building is seen past a statue of George Washington on the steps of Federal Hall on Wall Street in Lower Manhattan in New York

Graphic: S&P 500 PE revisits dot-com highs https://fingfx.thomsonreuters.com/gfx/mkt/ygdvzmrynpw/Pasted%20image%201597765664933.png

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.