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As S&P 500 Hits Another Record High, These Top Stocks Are Leading Its Historic Rally This Year

Topline

Major stock market indexes are nabbing new record highs at an unprecedented pace this year as a slew of companies benefiting from trillions of dollars in government stimulus and the Covid-19 vaccine’s rollout headline this year’s best-performing stocks—here are the top ten in the S&P 500.

Key Facts

The S&P 500 climbed 0.3% Wednesday to close at an all-time high of 4,536 points, marking the index’s 54th closing record this year and lifting year-to-date gains to nearly 23%, already more than last year’s 18% increase.

Heading up the index’s gains this year, shares of Moderna have skyrocketed 273% as the biotech firm eyes record revenue of $20 billion in 2021 (up 2,400% from 2020) thanks to its production of Covid-19 vaccines, which have been administered about 180 million times in the U.S. since late December. 

Steel producer Nucor and green-energy firm Generac have surged 121% and 92%, respectively, leading a crop of industrial stocks climbing in anticipation of Congress’ lofty plans for infrastructure investments, including $110 billion for roads, bridges and transportation, in addition to $150 billion for clean energy initiatives. 

The possibility of heightened fiscal spending has also lifted shares of cybersecurity firm Fortinet, up 108% amid the White House’s efforts to bolster national security, and chipmaker Nvidia, whose 77% gain leads a semiconductor rally as Congress looks to authorize $52 billion to help ease domestic chip shortages.

Meanwhile, Devon Energy and Marathon Oil have soared 87% and 76%, respectively, as the energy industry pares back its massive losses from last year, when a dearth in travel tanked demand for oil.

Rounding out the S&P’s top ten stocks, IT giant Gartner and pharmaceutical firm Charles River Labs are up 93% and 78%, respectively, after both companies posted record-breaking revenues last quarter.

Tangent

The Nasdaq Composite also closed at a record high on Thursday and has climbed 21% this year, led by Moderna, Google parent Alphabet and chipmakers ASML and Nvidia.

Key Background

Boosted by blowout corporate earnings and trillions of dollars in government stimulus, the S&P 500 has surged more than 100% from its mid-pandemic low in March 2020, with big-tech stocks leading most of the market’s rally through the end of last year. This year, however, top stocks hail largely from resurgent industries hardest hit by the pandemic. Real estate was last year’s second-worst-performing sector but is heading up gains in the S&P this year, surging 33% since January. Meanwhile, energy stocks have climbed 25% after plummeting nearly 34% in 2020. “The majority of Wall Street is still very bullish because there is just so much stimulus, with infrastructure spending just around the corner,” Oanda senior market analyst Ed Moya wrote in a Thursday note. 

What To Watch For

The House has agreed to vote on the Senate’s $1 trillion infrastructure bill by September 27, but Speaker Nancy Pelosi (D-Calif.) has insisted she won’t hold a vote until the Senate also moves on Democrats’ $3.5 trillion budget resolution, a larger package filled with spending priorities that didn’t make it into the bipartisan infrastructure bill. That bill is set to face opposition from moderate Democrats concerned over heightened spending. In a Monday note, Goldman Sachs analysts said they ultimately expect Congress will authorize another $3 trillion in fiscal support within the next few months.

What We Don’t Know

When the Federal Reserve will finally hit the brakes on its pandemic-era monetary stimulus, namely the $120 billion it’s been buying in bonds each month to prop up the economic recovery. Last month, Goldman analysts said they believe the Fed will formally announce a reduction of about $15 billion by November. Market analyst Tom Essaye, founder and president of the Sevens Report, says such an amount could spark a “knee-jerk” drop in stocks that quickly abates. If the Fed begins tapering at a rate of $30 billion each month, however, Essaye says stocks would drop sharply, led by those in sectors hit hardest by the pandemic, including energy, materials and consumer discretionary.

Further Reading

Stock Market Broke Records With August Winning Streak—But September Is Historically One Of The Worst Months For Stocks (Forbes)

Senate Passes $1.2 Trillion Infrastructure Bill After Months Of Negotiations—Here’s What Comes Next For Biden’s Agenda (Forbes)

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