The S&P 500 Approaches a New Milestone

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The stock market was on the brink of an exciting achievement, as the S&P 500 index came tantalizingly close to surpassing the 5,000-point mark for the very first time. In the final moments of Thursday’s trading session, the S&P 500 reached an intraday high of 5,000.40, just shy of the milestone. While it ultimately closed below at around 4,998, according to FactSet, this near miss did not go unnoticed.

From a technical standpoint, professional investors do not attribute much significance to these round-number thresholds. However, they do hold a certain psychological weight and can impact market sentiment. Breaking through such barriers is often viewed as a positive accomplishment, while failure to do so may dampen the spirit of a rally.

Reflecting on the past, technical analyst Mark Arbeter, president of Arbeter Investments, noted that these significant numbers have historically acted as a ceiling for the market. He pointed out that it took several years for both the Dow Industrials and the S&P 500 to decisively surpass their respective milestones.

In the case of the Dow Industrials, it almost breached 1,000 in January 1966 but did not firmly break above until early 1983. Similarly, the S&P 500 crossed the 100 mark in 1968 but didn’t truly burst through until 1980, Arbeter recalled.

Drawing from this historical context, Arbeter cautiously mentioned his expectation of a potential pullback or correction, considering the current extended nature of the market. With that in mind, investors now eagerly await what happens next as the S&P 500 hovers near this momentous threshold.

Milestones and Market Benchmarks

When it comes to reaching milestones, the S&P 500 outshines the Dow Jones Industrial Average (DJIA) on a percentage-point basis. While a mere 2.6% rise is needed for the DJIA to surpass the 39,000-point mark from 38,000, the S&P 500 requires a 25% gain to move from 4,000 to 5,000.

However, despite its greater significance, milestones achieved by the S&P 500 tend to receive less attention compared to those of the Dow. The S&P 500 represents a much larger portion of the investible U.S. stock market and is regarded by investment professionals as the true large-cap benchmark. In contrast, although the Dow has been a measuring stick for the U.S. stock market since 1896, it is more widely recognized by the public overall.

The S&P 500 is approaching a significant milestone as it nears the 5,000 mark. If it closes above this level, it will be the first time in more than two-and-a-half years since the index surpassed 4,000 on April 1, 2021. According to Dow Jones Market Data, this would also be the longest stretch between 1,000-point milestones for the S&P 500 since the nearly five years it took to move from 2,000 to 3,000 points from August 2014 to July 2019.

Investors have expressed concerns about the present stock-market rally and the concentration of market leadership. Dow Jones Market Data highlights that the top-five companies by market capitalization now account for a larger portion of the S&P 500 than at any other previous 1,000-point milestone.

Related: Stock-market investors fear a megacap meltdown. Here’s what history says.

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