Benzinga - by Shanthi Rexaline, Benzinga Editor.
With just one trading session left in the year, the U.S. market has rebounded impressively from its lackluster performance in 2022. The S&P 500 is poised to break out to a new high, boasting a gain of 24.6% for the year. Meanwhile, the S&P Equal Weight Index, which equally weights its constituents, has seen a more modest 12% advance, highlighting the influence of mega-caps in the market rally.
Top Winners: Nvidia Corp. (NASDAQ:NVDA)
YTD Gain: +239%
AI-leveraged Nvidia takes the lead with a 239% gain. The company’s AI accelerator chipsets, powering large-language models, have positioned it at the forefront of the tech arena.
Meta Platforms, Inc. (NASDAQ:META)
YTD Gain: +198%
Meta benefited from a rebound in ad spending and efficiency measures, including significant job cuts. The success of its TikTok clone, Reels, contributed to its impressive performance.
Royal Caribbean Cruises Ltd. (NYSE:RCL)
YTD Gain: +163%
Cruise-line operators rebounded from COVID-19 disruptions, capitalizing on the resurgence in travel and leisure. Economic uncertainties have made people cautious, but the outlook may improve in the new year.
Builders FirstSource, Inc. (NYSE:BLDR)
YTD Gain: +160%
Despite a lackluster housing market recovery, this Dallas-based supplier of building materials secured the fourth spot among the S&P 500 gainers.
Uber Technologies, Inc. (NYSE:UBER)
YTD Gain: +155%
Uber’s gains were spread throughout the year, with a steeper ascent in the latter part, driven by news of its S&P 500 inclusion.
Palo Alto Networks, Inc. (NASDAQ:PANW)
YTD Gain: +112%
Palo Alto, a security software company, secured the ninth spot among the best-performing S&P 500 stocks, driven by strong fundamental performance.
Tesla, Inc. (NASDAQ:TSLA)
YTD Gain: +106%
Tesla’s performance was a tale of two halves. Despite concerns over aggressive price cuts impacting margins, the stock is set to end the year as the tenth best-performing S&P 500 stock.
What Lies Ahead for the ‘Magnificent Seven’? The “Magnificent Seven” is the moniker given to the biggest seven mega-cap tech names: Nvidia, Meta, Tesla, Amazon, Inc. (NASDAQ:AMZN) (up 83% YTD), Alphabet, Inc. (NASDAQ:GOOG) (NASDAQ:GOOGL) (+59% YTD), Microsoft Corp. (NASDAQ:MSFT) (+58% YTD) and Apple, Inc. (NASDAQ:AAPL) (+50% YTD). The rally in these stocks could cool off next year, given the overbought levels at which they are trading.
Some analysts, such as Gene Munster, anticipate sub-$20 billion tech companies outperforming large-cap ones in 2024. The iShares Russell 2000 Growth ETF (NYSE:IWO) will likely outperform the SPDR S&P 500 ETF Trust (NYSE:SPY), an exchange-traded fund that tracks the broader S&P 500 Index, he said. The AI revolution’s continued momentum is a factor in this prediction, with AI potentially beating the Federal Reserve’s GDP projection for 2024.
Upside Potential for the ‘Mag 7’ Stocks:
Tesla, despite facing pessimistic expectations, could defy projections with increased volume and margin improvements. Munster believes Tesla will maintain its U.S. market share in 2024, contrary to forecasts of significant erosion.
With the Federal Reserve funds rate expected to be cut in 2024, there’s potential for increased risk appetite, drawing investors back into the stock market. The relative attractiveness of stocks compared to safe havens like bonds, gold, and the U.S. dollar is likely to rise.
The SPY ended Thursday’s session up 0.09% at $476.69, according to Benzinga Pro data.
Read Next: Oil’s Rollercoaster 2023: Crude’s Volatile Year In Review And What Awaits In 2024
© 2023 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.