To The Moon

The S&P 500 index reached the significant threshold of 5,000 points just moments before the close of trading on Thursday, Feb. 8, extending its run to new all-time highs. US equities fluctuated on Thursday, with the index briefly hitting 5,000 before closing just below the level in a rally driven by a narrow group.

⚠️ Trading tips: looking at SPY calls from dip buy to breach 500 on Friday following the footsteps of SPX a day before. Avoid swing trades over the weekend and enjoy the reunion dinner with family. Have a prosperous, joyous & awesome Lunar New Year ahead everyone! 🧧

SPY to breach 500 next

Only a month into the new year, the S&P 500 (SP500) is up 4.7%, which is more than halfway towards the 9% average annual return seen over the past two decades. Some FOMO may also be taking place among investors who missed out on the big rally last year when the benchmark index soared more than 24%.

The concentration of weight in the Magnificent Seven within the S&P 500 Index plays a crucial role in explaining the stark 17-percentage-point difference in performance over the last year between the two indices.

The combined weight of Apple Inc. (NASDAQ:AAPL), Microsoft Corp. (NYSE:MSFT), Alphabet Inc. (NASDAQ:GOOG) (NASDAQ:GOOGL), Amazon Inc. (NASDAQ:AMZN), Meta Platforms Inc. (NASDAQ:META), NVIDIA Corp. (NASDAQ:NVDA) and Tesla, Inc. (NASDAQ:TSLA) in the cap-weighted S&P 500 has surged to 29.3% of the overall index.

Together, these seven stocks have soared by nearly 80% over the last year. Remarkably, these heavyweights alone have contributed 64% of the S&P 500’s returns during the same period.

As the S&P 500 index celebrates its monumental leap to the 5,000-point milestone, investors and market observers are prompted to look beyond the surface of these record-breaking numbers.

A total of 319 companies in the S&P 500 have reported quarterly earnings so far, and 80.6% of them reported above analyst expectations, according to LSEG. That compares to a 67% beat rate in a typical quarter since 1994.

All eyes will be on the US CPI revisions Friday, a print that is expected to get more attention this year than usual. Economists on Wall Street and in Washington learned their lesson a year ago: The revisions — typically small and therefore ignored — were large enough to cast doubt on overall inflation progress. In the euro area, Germany and Latvia will publish CPI data. 

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