Current:Home > NewsStocks close out 2023 with a 24% gain, buoyed by a resilient economy-DB Wealth Institute B2 Expert Reviews
Stocks close out 2023 with a 24% gain, buoyed by a resilient economy
View Date:2024-12-23 14:18:28
Investors have plenty to cheer as 2023 draws to a close, with the S&P 500 ending the year with a gain of more than 24% and the Dow finishing near a record high. Easing inflation, a resilient economy and the prospect of lower interest rates buoyed investors, particularly in the last two months of the year.
The benchmark S&P 500 index inched lower Friday, the last trading day of 2023, but ended the year with a 24.2% gain. The Dow Jones Industrial Average rose more than 13% this year, and the Nasdaq soared 43%, driven by gains in big technology companies, including Nvidia, Amazon and Microsoft.
The rally that started in November helped broaden the gains within the market beyond just the big technology companies. Investors were also buoyed by a December forecast from the Federal Reserve that it plans to cut interest rates three times in 2024.
The rally marked a big psychological shift for investors, said Quincy Krosby, chief global strategist at LPL Financial.
"Investors were able to accept that fact that the market would close the year on a higher note," Krosby said. "Above all else, it was broad participation in the market that reinforced and confirmed gains for smaller company stocks were particularly important."
Most major indexes were able to erase their losses from a dismal 2022. Smaller company stocks had a late rally, but managed to erase the bulk of their losses from last year. The Russell 2000 index finished 2023 with a 15.1% gain after falling 21.6% in 2022.
"Broadening participation predicated on falling interest rates and signs of a soft-landing scenario have underpinned the recovery," noted Adam Turnquist, chief technical strategist for LPL Financial, in a research note earlier this month.
It's possible the rally could continue, he added. "Over the last 100 years, and filtering for record highs occurring at least three months apart, upside momentum has historically continued," he noted.
The Magnificent 7
The broader market's gains were driven largely by the so-called Magnificent 7 companies, which include Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta Platforms and Tesla. They accounted for about two-thirds of the gains in the S&P 500 this year, according to S&P Dow Jones Indices. Nvidia lead the group with a gain of about 239%.
Investors in the U.S. came into the year expecting inflation to ease further as the Federal Reserve pushed interest rates higher. The trade-off would be a weaker economy and possibly a recession. But while inflation has come down to around 3%, the economy has chugged along thanks to solid consumer spending and a healthy job market.
The stock market is now betting the Fed can achieve a "soft landing," where the economy slows just enough to snuff out high inflation, but not so much that it falls into a recession. As a result, investors now expect the Fed to begin cutting rates as early as March.
The Fed's signal that it will make three quarter-point cuts to the benchmark rate next year could add more fuel to the broader market's momentum in 2024. That rate is currently sitting at its highest level, between 5.25% and 5.50%, in two decades.
High interest rates and Treasury yields hurt prices for investments, so a continued reversal means more relief from that pressure. Wall Street is forecasting stronger earnings growth for companies next year after a largely lackluster 2023, with companies wrestling with higher input and labor costs and a shift in consumer spending.
- In:
- Economy
- OPEC
- Inflation
veryGood! (91)
Related
- 'Devastation is absolutely heartbreaking' from Southern California wildfire
- Arrests for illegal border crossings nudge up in February but still among lowest of Biden presidency
- Wisconsin Rep. Mike Gallagher to resign early, leaving razor-thin GOP majority
- Why Frankie Muniz Does Not Allow His Son to Become a Child Actor
- Florida Man Arrested for Cold Case Double Murder Almost 50 Years Later
- Ilia Malinin nails six quadruple jumps and leads US team's stunning performance at worlds
- Amazon Has Major Deals on Beauty Brands That Are Rarely on Sale: Tatcha, Olaplex, Grande Cosmetics & More
- Museum, historical group launch search for wreckage of ace pilot Richard Bong’s crashed plane
- What Just Happened to the Idea of Progress?
- Winners announced for 2023 Virginias Associated Press Broadcasters Awards
Ranking
- The Latin Grammys are almost here for a 25th anniversary celebration
- Scottsdale police shoot, kill armed suspect in stolen vehicle who opened fire during traffic stop
- Palm Sunday is this weekend; What the Holy Day means for Christians
- Ilia Malinin nails six quadruple jumps and leads US team's stunning performance at worlds
- Infowars auction could determine whether Alex Jones is kicked off its platforms
- Kristin Cavallari Jokes Boyfriend Mark Estes Looks Like Heath Ledger
- A total eclipse is near. For some, it's evidence of higher power. For others it's a warning
- April 2024 total solar eclipse guide: How to watch, understand and stay safe on April 8
Recommendation
-
Steelers shoot for the moon ball, but will offense hold up or wilt in brutal final stretch?
-
Rep. Marjorie Taylor Greene files motion to oust House Speaker Mike Johnson over spending deal
-
Mega Millions jackpot rises to $1.1 billion after another drawing without a winner
-
Nevada’s first big-game moose hunt will be tiny as unusual southern expansion defies climate change
-
Lions find way to win, Bears in tough spot: Best (and worst) from NFL Week 10
-
U.K. man gets 37 years for fatally poisoning couple with fentanyl, rewriting their will
-
What NIT games are on today? Ohio State, Seton Hall looking to advance to semifinals
-
Louisiana sheriff candidate wins do-over after disputed 1-vote victory was tossed