20 stocks account for 90% of Wall Street’s gains this year

Just 20 stocks account for nearly 90 percent of the U.S. benchmark’s $2.36 billion gain this year, as instability in the banking sector dampened interest rate expectations and boosted the appeal of Big Tech.

Among the big gainers, shares of chip maker Nvidia are up 83 percent so far this year, while Facebook owner Meta is up 76 percent and Salesforce is up 42 percent, signaling strong concentration in the world’s most influential stock market.

These and the 17 best-performing stocks in the S&P 500 have a market value of $2.05 billion in 2023. Apple’s valuation alone has increased by nearly $600 billion, or 30 percent, in the past three months.

The market capitalization of the other stocks in the index, which is up almost 7 percent so far in 2023, has grown by just $320 billion over the same period, according to private equity firm Apollo Global Management.

The S&P 500 rose just 1.4 percent in the first three months of 2023, ignoring gains in megacap growth stocks, UBS said.

“People are looking for security and convenience because of the cross currents in the market, and technology gives them a lot of ease,” said JPMorgan sales trader Jack Atherton. Noting the well-worn phrase that “when the Fed hits the brakes, someone goes through the windshield,” he added that megacap tech appears to be “wearing an eight-point harness.”

Rising borrowing costs hit US tech companies in particular in 2022, with the tech-heavy Nasdaq Composite down a third from its all-time high as the present value of tech groups’ future cash flows fell.

The U.S. central bank has continued to raise interest rates into 2023, but the collapse of California-based Silicon Valley Bank in March has some investors expecting it to tighten lending standards and cool economic activity to the extent that further aggressive rate hikes are in the offing. is no longer necessary.

The jitters in the banking sector are half a percentage point short of the level at which investors expect interest rates to peak, and markets are divided over whether the Fed will raise rates by 0.25 percentage points to a target range of 5 to 5.25 percent or leaves them. unchanged when it next meets in early May. A month ago, before SVB’s bankruptcy, investors expected interest rates to reach a peak of around 5.5 percent in September.

Technology stocks were among the main beneficiaries of the recalibration. Charlie McElligott, an analyst at Nomura, said many of those who suffered in 2022 but dominated U.S. stock indexes are now “exploding higher with a violent return to interest rates.”

High inflation means the zero interest rate environment that drove tech stocks to record highs in 2021 is unlikely to return anytime soon, and the sector’s nascent rally may already be fading. Analysts at Bank of America saw the first aggregate outflow from tech stocks in six weeks in the five days to March 31.