The 2023 stock market rally surprised even Wall Street veterans. Here are the top 10 S&P 500 leaders and what can drive them.

  • The rally in U.S. stocks this year surprised even Wall Street veterans after a dismal 2022.
  • The S&P 500 is up nearly 9% this year, largely due to lower inflation expectations.
  • Tesla, Catalant and Nvidia are among the top three in the US stock index.

After the dismal performance of US stocks in 2022, many Wall Street pundits expected the market to worsen this year. But they performed so well initially that even longtime investors were stunned.

“I think the rally surprised a lot of veteran traders, including a few old kooks like me,” trading legend and UBS floor director Art Kashin told CNBC.

January is a month when investors typically move away from high-risk assets, so the optimism in the market was “weird,” according to Wells Fargo equity strategist Anna Khan.

The underlying US stock index S&P 500 is up more than 6% in 2023. It rose mainly on expectations that a slowdown in inflation would allow the Federal Reserve to reverse its aggressive rate hikes, which usually affect asset prices and economic growth.

Here are the best S&P 500 stocks this year as of Thursday’s close and what could be driving them higher.

1. Tesla leads with a 68.3% gain as investors lean back into tech stocks. The Elon Musk-led electric car maker posted strong fourth-quarter results, news of an expansion of the tax credit for electric vehicles and a surge in sales in China as price cuts stimulate demand.

2. Catalant rose 59.9%, thanks in part to reports that life sciences giant Danaher is interested in a takeover of the New Jersey drug maker. It beat earnings expectations even though it didn’t make a profit this month in its quarterly report.

3. Nvidia scored 52.9%. The graphics chip specialist is well positioned to capitalize on the ChatGPT craze, given that its technology is used in devices that run AI tools and could play a critical role in the development of AI. Investors seeking access to new technologies may have taken notice.

4. Align Technologies, the leading manufacturer of Invisalign dental straighteners, was up 52.4%. Shares jumped 27% after the company reported higher-than-expected fourth-quarter earnings in February. Some analysts believe pent-up demand in a reopening China could boost the company’s shipments this year.

5. Warner Bros. Discovery scored 51.6%. In early February, the company decided to scrap its plans to consolidate its streaming services and keep Discovery+ as a separate platform. The change in strategy was intended to avoid losing subscribers who may not be willing to pay higher prices to view other content.

6. Royal Caribbean grew by 48.8%. Some analysts expect the year to be more optimistic for cruise lines as pent-up demand from the pandemic dries up.

7. Metaplatforms grew by 47.9%. Parent company Facebook’s stock is posting its best performance in a decade after CEO Mark Zuckerberg called 2023 a “year of efficiency” with a string of cost cuts and share buybacks.

8. Monolithic power systems scored 44.4%. Shares of the chip maker are already rising in 2023 and surged 10% on Wednesday after its fourth-quarter earnings beat Wall Street’s expectations and it increased its quarterly dividend.

9. Carnival grew by 43.1%. Like other members of the cruise and hotel industry, this year the potential benefit from consumer spending on entertainment.

10 Norwegian Cruise Line the increase was 38.2%.

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