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- Just eight out of 251 trading days can explain the market's big moves this year, DataTrek said.
- Four factors are largely behind the moves: Fed policy, long term interest rates, Big Tech earnings, and avoiding recession
- This "supports our positive view into year-end since we believe rates will drop further from here," analysts wrote.
Of all the spasms the markets have gone through this year, just eight out of 215 trading days can explain how we've ended up where we are right now, according to research firm DataTrek.
And from those eight days, four themes emerge as the main movers: Big Tech earnings, Fed policy, interest rates, and hopes of avoiding a recession.
"Yes, this is an admittedly 'cute' analysis, but it neatly summarizes why US large caps are up rather than down year to date," analysts wrote in the note published Wednesday. "It also supports our positive view into year-end since we believe rates will drop further from here."
Here are the days the S&P 500 has rallied the most so far in 2023:
- January 6 (+2.3%)
- January 20 (+1.9%)
- March 3 (+1.6%)
- March 14 (+1.6%)
- March 16 (+1.8%)
- April 27 (+2.0%)
- May 5 (+1.8%)
- November 2 (+1.9%)
And here is why:
Big Tech earnings
Tech stocks have been carrying the market this year, especially the "Magnificent Seven." That was on display January 20, when Netflix reported strong fourth-quarter subscription growth, yanking the Nasdaq up 2.7%.
Then in April, Meta shares rallied 14% after its quarterly results. The same thing happened in May when Apple's earnings boosted the stock 4.7%.
In September, Apollo Management's Torsten Sløk wrote that the Magnificent Seven accounted for 34% of the S&P 500 index. The rest of the benchmark index's stocks were basically flat.
Interest rates
Rising bond yields weighed on markets throughout 2022 and into 2023, but hints that they could be headed back down have given stocks a boost as well.
On March 3, stocks rallied as the 10-year Treasury yield ticked downward after touching 4%.
Fed policy
Last Thursday saw a big rally in stocks — the fourth best day of the year. And it came at the heels of the Fed's decision to pause on rates again. Following that news, 10-year Treasury yields fell to 4.67%. And the S&P 500 sprung up by 1.9%
Avoiding a recession
The year began with widespread fears of a possible recession brought upon by the Fed's monetary tightening, and the market has reacted strongly to hopes of dodging a downturn.
The biggest market jump in 2023 followed the December jobs report that showed slower-than-expected wage inflation. Seeing hope that the Fed could ease up on rates, the S&P 500 jumped 2.3% on January 6.
And in March, as the market shuddered with concerns about the sudden drop in credit leading to a recession, stocks jumped on signs of relief. The S&P 500 had two strong days on the 14th and 16th, rebounding on news that (1) deposits at Silicon Valley Bank and Signature Bank were guaranteed, and (2) that big banks had deposited money with First Republic to slow down the bleeding outflow of money.