Stock Market Posts Second-Best First Half In 23 Years—With S&P 500 Hitting New High - Forbes

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Stocks ticked up around the world Wednesday, ending the first half of the year with the S&P 500's fifth-straight day of record highs as technology companies continue to post impressive gains while industries hard hit by the pandemic stage eye-popping recoveries.

Key Facts

Climbing 0.1% Wednesday, the S&P has jumped 16% this year—faring much better than the index's 7% decline during last year's first six months and pulling off the second-best first-half performance since 1998, behind only 2019's 17% gain.

After crashing last year, energy stocks continue to head up the index's gains, with top-performer Marathon Oil up nearly 100%, while Diamondback Energy, Occidental Petroleum and Nucor have all jumped at least 78%; 6 of the S&P's top 10 stocks this year are in the energy sector.

The financial sector is the year's second-best performing in the S&P (up 24%), while real estate and communication services follow closely behind—climbing 23% and 19%, respectively.

Despite recently underperforming, the Dow Jones Industrial Average also edged higher Wednesday, jumping 200 points, or 0.6%, to close at 34,502—less than 1% shy of an early May high and up 14% since last year.

The tech-heavy Nasdaq, on the other hand, ended the day down 0.1%, but it's still up more than 14% this year and hit its latest high Tuesday.

Crucial Quote

“There’s more than a hint of Goldilocks in the near-term," Nigel Green, the CEO of $12 billion advisory DeVere Group said in a Wednesday note. “The continuing robust economic growth in major economies, strong corporate earnings, ultra-low interest rates and a sleeping bond market, all mean that investors will keep piling into equities, topping up their portfolios to build wealth."

Contra

"Thanks to the strong start to this bull market, stock valuations have become a widespread concern," LPL Financial analysts wrote in a note this week, forecasting the S&P will only climb about 3% higher in the second half of the year. "After a big rally, more optimism is priced in, and that higher bar then opens the door to disappointment."

What To Watch For

A slew of economic data and corporate earnings reports are due out in the coming weeks and will surely test the bull market’s strength. The June jobs report is slated for release Friday, and the Federal Reserve will release minutes from its upcoming Federal Open Market Committee meeting next Wednesday. The following week, second-quarter earnings season gets started with results from Goldman Sachs, JP Morgan and PepsiCo on July 13.

Key Background

Though energy and financial stocks headed up the market at the start of this year, technology stocks have also bounced back after underperforming this spring amid accelerating economic growth and the threat of rising interest rates. Those fears spurred a stock market rotation away from growth stocks (like those in tech) to cyclical and value-leaning slices of the market that struggled during the pandemic (like energy and financials). In recent weeks, however, Federal Reserve officials have made it clear the Fed isn't looking to hike interest rates anytime soon.