S&P 500 hits record high, signalling market rebound

Tech stocks and economic optimism drove US shares to record highs on Friday

Overtaking the previous record that had been established in January 2022, the S&P 500 index, which is a measure of the shares of the largest companies in the United States, finished the day with a gain of 1.2% to reach a closing price of 4,839.8. Because it has reached a new high, it has recovered from the fall that it experienced two years ago. During that time, the markets were concerned about inflation and the consequences that it would have for the economy. 

Now that inflation is decreasing and the risks of an economic downturn are decreasing, investors have re-entered the stock market on a large scale. As optimistic investors bought up shares, the Dow Jones Industrial Average, which tracks companies that are meant to be representative of the economy, went on a rebound to hit its record at the end of the previous year. Friday was the day that it reached yet another new high, with a daily increase of one percent. 

The Nasdaq, which is where many technology companies are listed, experienced a 1.7% increase but is still approximately 4% lower than its peak in 2021. Among the rising share prices that are referred to as a bull market, the new S&P record definitively marks out the current period for Wall Street. This is because shares recovered 35% from the low point that occurred in October 2022. Hopes that the United States Federal Reserve, which aggressively raised interest rates in 2022 to slow price increases and cool the economy, is close to declaring victory and possibly beginning to reverse course later this year have been a source of encouragement for investors. It would reduce the costs of borrowing money and relieve some of the pressure on the economy, which would be beneficial to businesses. Reduced interest rates would, on the other hand, encourage investors to shift their focus away from investments that are linked to interest rates and toward shares, which would result in an additional increase in prices. 

Tech companies have also been buoyed by the expectation that developments in artificial intelligence will result in the release of new growth opportunities. As a result of the recovery of retirement and investment accounts, as well as the decrease in the price of gasoline and the relief from price increases in other items, the public is also experiencing an improvement in sentiment. 

One of the most closely monitored barometers of mood, the monthly survey of consumers conducted by the University of Michigan, reported on Friday that sentiment this month had reached its highest level since 2021, representing an increase of more than 21% from the previous year. "Consumer views were supported by confidence that inflation has turned a corner and strengthening income expectations," the findings from the survey. "Over the last two months, sentiment has climbed a cumulative 29%, the largest two-month increase since 1991 as a recession ended."