S&P 500 clinches double-digit gain in first half of 2024 after rallying three straight quarters

By Christine Idzelis

'People have been banging on the recession drum for two-and-a-half, three years,' says Mike Skordeles, head of U.S. economics at Truist

The U.S. stock market rallied in the first half of 2024, with the S&P 500 scoring a double-digit gain as it ended June near its all-time closing peak.

The S&P 500 SPX fell modestly Friday to finish at 5,460.48, just 0.5% below its record close on June 18, according to Dow Jones Market Data. The index has climbed 14.5% so far this year on the back of soaring Big Tech stocks, posting a historically strong gain for the first half of a year as the U.S. economy continues to expand despite signs of slowing.

"People have been banging on the recession drum for two-and-a-half, three years," said Mike Skordeles, head of U.S. economics at Truist, in a phone interview Friday. U.S. economic growth this year is "cooling but not weak," while inflation is easing based on the latest data, he said.

The Federal Reserve has been aiming to cool the economy in a bid to lower inflation durably toward its 2% target without triggering a recession. A reading Friday on inflation in May via the Fed's preferred gauge was in line with Wall Street's expectations.

U.S. inflation, as measured by the personal-consumption expenditures price index, was flat in May while the year-over-year rate slowed to 2.6%, according to a report Friday from the Bureau of Economic Analysis. Core inflation, which excludes food and energy prices, edged up 0.1% last month but eased over the past year to 2.6%.

"The good news" is that the latest data continue to "dispel the notion" that the reacceleration in inflation seen in the first quarter had "staying power," said Kevin Gordon, a senior investment strategist at Charles Schwab, in a phone interview Friday. "It's reversing some of that," with inflation appearing back on the path of easing toward 2%, he said.

Read: Why PCE inflation report is 'encouraging news for capital markets'

Also, a revision lower in consumer spending in the report on U.S. gross domestic product in the first quarter, released June 27, is "consistent with more downward pressure on inflation," he said. While inflation is still "biting for the lower-income consumer," Gordon said consumers overall have been "resilient" in the U.S. as the labor market so far has remained solid with a relatively low unemployment rate.

Truist's Skordeles said he expects the U.S. economy will expand around 2% in 2024.

Meanwhile, a small group of Big Tech stocks have propelled the S&P 500's jump in 2024, with shares of artificial-intelligence chip maker Nvidia Corp. (NVDA) surging 149.5% so far this year. Other heavyweights in the widely followed equities index - including Facebook parent Meta Platforms Inc. (META), Google parent Alphabet Inc. (GOOGL) (GOOG), Amazon.com Inc. (AMZN) and Microsoft Corp. (MSFT) - have also posted outsize gains so far this year.

The S&P 500 has risen for three straight quarters, soaring 32.6% from its 52-week low in late October, according to Dow Jones Market Data.

But the first half of 2024 has been "a tale of two markets" when looking at the maximum pullback for the top-heavy S&P 500 index versus the much larger average drawdown seen among members, Gordon noted. "There's been a lot more churn and a lot more weakness under the surface, but it's been masked by a lot of these megacap names" that have posted big gains in 2024, he said.

Still, about two-thirds of the S&P 500's members have consistently traded above their 200-day moving average this year, according to Gordon.

Stocks in the S&P 500 have seen "rolling corrections" in phases in 2024, he said, "but it hasn't been enough to take down the broader index."

-Christine Idzelis

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06-28-24 1905ET

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