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Another closely watched index is set to close a new record.
The S&P 500 Equal-Weighted Index (^SP500EW) is on track for its first record close since January 2022.
While the traditional S&P 500 (^GSPC) is market cap weighted, meaning a few large stocks have a huge impact on the index’s performance, the equal-weighted index values all 500 stocks in the index equally.
As the Goldman Sachs equity strategy team highlighted in the Yahoo Finance Charbook in January, this led to outsized gains for the market-weighted index and a lower valuation for the equally-weighted index.
Many on Wall Street believed this could lead to a broadening of the stock market rally, rather than a few “great” stocks dominating gains. And Thursday’s market action is the latest sign that the narrative may be bearing fruit.
“Market ‘tightness’ – that is, just a handful of stocks doing all the work – is no longer an accurate reading of things,” Baird investment strategy analyst Ross Mayfield wrote in a note to his customers on March 1st.
This could be crucial to the 2024 stock market rally as hiccups unfold in the Magnificent Seven trades, most recently with declines in Apple (AAPL) and Tesla (TSLA). Strategists believe strength in other areas could emerge if the market finds support if tech trading lags.
“The strength we are seeing in the economy and in American businesses is much broader based than just the AI trading that has gotten so much attention recently,” Goldman Sachs equity analyst Ben Snider told Yahoo Finance, noting the broad base of earnings growth. seen during fourth quarter reporting.
Oppenheimer’s John Stoltzfus made a similar point in a weekly note to his clients on Sunday. He highlighted that building broad-based strength is the reason he doesn’t believe the rally is over.
“There is likely room for further extension of this year’s stock market rally and an opportunity to see stocks climb the proverbial wall of worry even further,” Stoltzfus wrote.