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S&P 500 About to Hit 5,000: More Reasons for Further ETF Rally

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On Wednesday, Wall Street rallied as investors analyzed a fresh wave of quarterly earnings reports, while the discussion regarding the timing of potential interest rate cuts remained a talk of the town.The Dow Jones Industrial Average climbed by 0.4%, equivalent to approximately 150 points, while the S&P 500 saw a notable increase of over 0.8%.

The Nasdaq Composite logged a significant uptick of nearly 1%. Notably, the S&P 500 achieved a closing milestone at 4,995, marking a new record high and positioning itself on the brink of breaching the 5,000 level for the first time in history.

Let’s find out the factors that could boost S&P 500 ETFs even more.

Fed to Cut Rates by the End of 2024?

Despite the market's speculation regarding potential interest rate cuts, Fed officials reiterated their cautious approach. Boston Fed President Susan Collins emphasized that rate cuts could be on the horizon "later this year." However, the central bank would require additional evidence of inflation cooling before taking such actions. This stance underscores that the Fed is also weighing the options of rate cuts – a monetary policy stance investors are craving for.

Upbeat Earnings, Especially from Magnificent Seven

About two-thirds of S&P 500 firms are out with their earnings results this season. On average, these results have surpassed Wall Street expectations, contributing to the positive sentiment in the market. Notably, the "Magnificent Seven" stocks, Apple (AAPL - Free Report) , Microsoft (MSFT - Free Report) , Alphabet (GOOGL - Free Report) , Amazon (AMZN - Free Report) , NVIDIA (NVDA - Free Report) , Meta Platforms META and Tesla (TSLA - Free Report) , which account for almost 30% of the S&P 500 index, have come up with upbeat results this season.

These stocks were responsible for more than 62% of the S&P 500’s total return in 2023 and have been contributing to the S&P 500 rally this year as well. In fact, most experts anticipated a broadening of the market rally in 2024; however, market leadership has narrowed further this year. These stocks have driven more than 80% of the index's rise (read: Magnificent 7 ETFs Rise on Blockbuster Earnings).

AI Boom to Continue

In 2023, numerous companies gained from the excitement surrounding artificial intelligence (AI), but their performances have varied in 2024. Nvidia and Meta are at the forefront of the ongoing AI boom, whereas Tesla has fallen behind.

This gap has widened recently, following the release of financial results by almost all these companies. Meta's earnings report was especially positively received, causing the stock price of the social media behemoth to jump by more than 20% (read: Should You Buy Nvidia After Its Huge Run? ETFs in Focus).

Dividend Boosts by Some Heavyweight S&P 500 Companies

Disney (DIS - Free Report) announced a significant increase in its cash dividend by 50%, alongside the release of its fiscal first-quarter earnings report, which surpassed expectations. Meta also declared its first-ever dividend this reporting season. Meta Platforms said the dividend would be 50 cents per share. It also announced it had authorized an additional $50 billion in share repurchases.

ETFs in Focus

Against this upbeat backdrop, if you have faith in the potential market breadth of Wall Street, investors may track S&P 500 ETFs like Vanguard S&P 500 ETF (VOO - Free Report) , iShares Core S&P 500 ETF (IVV - Free Report) and SPDR S&P 500 ETF Trust (SPY - Free Report) .

Investors can also play the growth part of the index with SPDR Portfolio S&P 500 Growth ETF (SPYG - Free Report) and the value part of the index with SPDR Portfolio S&P 500 Value ETF SPYV. SPDR Portfolio S&P 500 High Dividend ETF Fund (SPYD - Free Report) is a good bet for the dividend plays of the index.


 

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