The S&P 500's wild ride to an all-time high
interest rates and resilient growth in 2024 took the S&P 500 stock index to a record high on Friday, after two roller-coaster years featuring soaring inflation, tumult in the banking industry and economic unease.
The benchmark index topped 4,820 in the afternoon, as chipmakers and big technology stocks powered gains on optimism around artificial intelligence (AI). This put the index above its previous record intraday high of 4,818.62 set on Jan.
4, 2022.
Stocks began wobbling in early 2022 on worries that surging consumer prices inflation would force the Fed to raise interest rates. The central bank's monetary tightening cycle turned out to be its most aggressive in decades, boosting Treasury yields to 16-year highs and battering stocks.
The index slumped as much as 25% from its peak, hitting its bottom for the cycle in October of 2022.
A sharp rally came in the latter months of 2023, as evidence that inflation was decisively cooling and a dovish message from the Fed helped drive stocks higher. The S&P 500 ended 2023 with a 24% increase, and has edged higher in a bumpy start to 2024.
The interplay between stocks and Treasury yields has been a key driver of market moves over the last two years.
Yields soared as the Fed began hiking interest rates to fight inflation and eventually hit a 16-year high in October 2023 as fiscal worries also exacerbated a selloff in U.S. government bonds.
Yields, which rise when bond prices fall, create investment competition to stocks while raising the cost of borrowing for companies and consumers.
Expectations for rate cuts in 2024 have pulled yields lower in recent months, with the benchmark 10-year Treasury yield recently at around 4.2% after breaching 5% in October.
