The initial version of this story had incorrect price changes for 2023.
Investors have staged a January rally, with solid gains for the S&P 500 and an even better showing for technology stocks that led the dismal downward action in 2022.
This may be a surprise, in light of the difficulties being reported by many companies this earnings season, along with mounting tech layoffs, but the stock market always looks far ahead. As evidenced by the inverted yield curve in the bond market, investors expect the Federal Reserve to stop its cycle of interest-rate increases and even pivot to begin stimulating the economy later this year.
On Tuesday, two-year U.S. Treasury notes
BX:TMUBMUSD02Y
were yielding 4.24%, while 10-year Treasury notes
BX:TMUBMUSD10Y
yielded 3.52%. Since bond prices rise when interest rates decline, investors have poured money into longer-term bonds in anticipation of the Fed’s eventual policy change away from its current inflation-fighting stance. The stock market’s direction can be influenced by the same sentiment.
The Federal Open Market Committee meets today and Wednesday, after which Federal Reserve Chairman Jerome Powell will hold a press conference to discuss monetary policy. Here’s what to expect.
The rally at month-end
The S&P 500
SPX
was up 5.5% for 2023 through 1:45 p.m. ET on Jan. 31, following a 19.4% decline in 2022. The Dow Jones Industrial Average
DJIA
was up 2.3% for the month, while the tech-dominated Nasdaq Composite Index
COMP
showed a 10% gain for January. (All price changes in this article exclude dividends.)
Here’s a rundown of how the 11 sectors of the S&P 500 have performed, with the full S&P 500 and the other two indexes at the bottom:
| Index | 2023 price change | 2022 price change | Forward P/E | Forward P/E – Dec. 30, 2022 | Forward P/E – Dec. 31, 2021 |
| Consumer Discretionary | 14.1% | -37.6% | 24.7 | 21.3 | 33.2 |
| Communication Services | 13.6% | -40.4% | 16.2 | 14.3 | 20.8 |
| Real Estate – SEC | 9.2% | -28.4% | 17.8 | 16.5 | 24.3 |
| Information Technology | 8.6% | -28.9% | 21.9 | 20.1 | 28.1 |
| Materials | 8.4% | -14.1% | 17.1 | 15.7 | 16.6 |
| Financials | 6.0% | -12.4% | 12.7 | 11.8 | 14.6 |
| Industrials | 3.1% | -7.1% | 18.7 | 18.1 | 20.8 |
| Energy | 2.3% | 59.0% | 10.6 | 9.8 | 11.1 |
| Consumer Staples | -1.8% | -3.2% | 20.3 | 20.9 | 21.8 |
| Health Care | -2.7% | -3.6% | 17.3 | 17.6 | 17.2 |
| Utilities | -3.1% | -1.4% | 18.1 | 18.8 | 20.4 |
| S&P 500 | 5.5% | -19.4% | 17.8 | 16.7 | 21.4 |
| Dow Jones Industrial Average | 2.3% | -8.8% | 17.4 | 16.6 | 18.9 |
| Nasdaq Composite Index | 10.0% | -33.1% | 24.6 | 22.4 | 31.5 |
| Source: FactSet | |||||
The top two sectors so far this year are last year’s two weakest performers — Consumer Discretionary and Communications Services. In case this is a surprise, keep in mind that a tech stock might not be in the information technology sector, as defined by S&P Dow Jones Indices.
The S&P 500 and its sectors are weighted by market capitalization. The largest stocks in the consumer discretionary sector are Amazon.com Inc.
AMZN
and Tesla Inc.
TSLA,
while the stocks in the communications sector with the heaviest weighting are Google holding company Alphabet Inc.
GOOGL
and Meta Platforms Inc.
META,
which is Facebook’s parent company.
The right-most columns in the sector table show changes in forward price-to-earnings ratios. These have declined since the end of 2021 for all S&P 500 sectors except Materials and Health Care. This is especially noteworthy for the energy sector following a strong performance in 2022. Energy remains the cheapest sector on a forward P/E basis.
Here’s how the forward P/E valuation for the S&P 500 has moved over the past 10 years.
Despite the broad decline since the end of 2021, the S&P 500’s weighted forward price-to-earnings ratio is above its 10-year average.
FactSet
The current valuation is far lower than it was at the end of 2021, but it is higher than the 10-year average valuation of 17.4 and the 20-year average of 15.7.
Best-performing stocks among the S&P 500
Here are the 20 stocks in the benchmark index that were up the most for 2023 through 1:45 pm. ET on Jan. 31:
| Company | Ticker | 2023 price change | 2022 price change |
| Warner Bros. Discovery Inc. Series A | WBD | 55.3% | -59.7% |
| Tesla Inc. | TSLA | 39.1% | -65.0% |
| Western Digital Corp. | WDC | 38.7% | -51.6% |
| Paramount Global Class B | PARA | 34.9% | -44.1% |
| Nvidia Corp. | NVDA | 33.3% | -50.3% |
| Carnival Corp. | CCL | 33.1% | -59.9% |
| MarketAxess Holdings Inc. | MKTX | 30.6% | -32.2% |
| Match Group Inc. | MTCH | 30.4% | -68.6% |
| Expedia Group Inc. | EXPE | 30.3% | -51.5% |
| Royal Caribbean Group | RCL | 29.7% | -35.7% |
| United Airlines Holdings Inc. | UAL | 29.3% | -13.9% |
| Albemarle Corp. | ALB | 28.9% | -7.2% |
| SVB Financial Group | SIVB | 28.3% | -66.1% |
| Seagate Technology Holdings PLC | STX | 27.7% | -53.4% |
| Nucor Corp. | NUE | 26.8% | 15.5% |
| Align Technology Inc. | ALGN | 26.6% | -67.9% |
| Capital One Financial Corp. | COF | 26.5% | -35.9% |
| Pool Corp. | POOL | 26.2% | -46.6% |
| American Airlines Group Inc. | AAL | 26.1% | -29.2% |
| Wynn Resorts Ltd. | WYNN | 26.0% | -3.0% |
| Source: FactSet | |||
Click the tickers for more about each company.
Best Nasdaq-100 performers
The Nasdaq-100 Index includes the largest 100 nonfinancial companies in the full Nasdaq Composite Index. Here are its top 20 performers so far this year:
| Company | Ticker | 2023 price change | 2022 price change |
| Lucid Group Inc. | LCID | 70.9% | -82.0% |
| Warner Bros. Discovery Inc. Series A | WBD | 55.3% | -59.7% |
| Tesla Inc. | TSLA | 39.1% | -65.0% |
| MercadoLibre Inc. | MELI | 37.6% | -37.2% |
| Nvidia Corp. | NVDA | 33.3% | -50.3% |
| Airbnb Inc. Class A | ABNB | 28.1% | -48.6% |
| Align Technology Inc. | ALGN | 26.6% | -67.9% |
| Atlassian Corp. Class A | TEAM | 23.9% | -66.3% |
| Meta Platforms Inc. Class A | META | 23.6% | -64.2% |
| Pinduoduo Inc. ADR Class A | PDD | 21.9% | 39.9% |
| Amazon.com Inc. | AMZN | 21.7% | -49.6% |
| Qualcomm Inc. | QCOM | 20.9% | -39.9% |
| Booking Holdings Inc. | BKNG | 19.8% | -16.0% |
| Netflix Inc. | NFLX | 19.8% | -51.1% |
| Micron Technology Inc. | MU | 19.4% | -46.3% |
| Ebay Inc. | EBAY | 17.8% | -37.6% |
| Lam Research Corp. | LRCX | 17.7% | -41.6% |
| Idexx Laboratories Inc. | IDXX | 17.6% | -38.0% |
| NXP Semiconductors NV | NXPI | 16.9% | -30.6% |
| Old Dominion Freight Line Inc. | ODFL | 16.5% | -20.8% |
| Source: FactSet | |||
The good old Dow
Here’s how all 30 components of the Dow Jones Industrial Average performed in January:
| Company | Ticker | 2023 price change | 2022 price change |
| American Express Co. | AXP | 16.2% | -9.7% |
| Dow Inc. | DOW | 15.6% | -11.2% |
| Walt Disney Co. | DIS | 14.0% | -43.9% |
| Salesforce Inc. | CRM | 13.3% | -47.8% |
| Boeing Co. | BA | 10.6% | -5.4% |
| Apple Inc. | AAPL | 10.4% | -26.8% |
| Visa Inc. Class A | V | 10.0% | -4.1% |
| Caterpillar Inc. | CAT | 6.5% | 15.9% |
| Nike Inc. Class B | NKE | 5.8% | -29.8% |
| Goldman Sachs Group Inc. | GS | 4.9% | -10.2% |
| Verizon Communications Inc. | VZ | 3.5% | -24.2% |
| Intel Corp. | INTC | 3.1% | -48.7% |
| JPMorgan Chase & Co. | JPM | 3.1% | -15.3% |
| Microsoft Corp. | MSFT | 1.8% | -28.7% |
| Travelers Companies Inc. | TRV | 1.5% | 19.9% |
| Home Depot Inc. | HD | 1.4% | -23.9% |
| McDonald’s Corp. | MCD | 1.0% | -1.7% |
| Cisco Systems Inc. | CSCO | 0.9% | -24.8% |
| Walmart Inc. | WMT | 0.3% | -2.0% |
| Walgreens Boots Alliance Inc. | WBA | -1.5% | -28.4% |
| Honeywell International Inc. | HON | -3.2% | 2.8% |
| 3M Co. | MMM | -3.3% | -32.5% |
| Coca-Cola Co. | KO | -4.6% | 7.4% |
| International Business Machines Corp. | IBM | -5.0% | 5.4% |
| Amgen Inc. | AMGN | -5.0% | 16.7% |
| Chevron Corp. | CVX | -5.2% | 53.0% |
| Merck & Co. Inc. | MRK | -5.9% | 44.8% |
| Procter & Gamble Co. | PG | -6.2% | -7.3% |
| UnitedHealth Group Inc. | UNH | -6.6% | 5.6% |
| Johnson & Johnson | JNJ | -8.6% | 3.3% |
| Source: FactSet | |||
Don’t miss: This dividend-stock ETF has a 12% yield and is beating the S&P 500 by a substantial amount
