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US500 has 2500 in its sights

Summary:

  • US stocks posted record closing highs in Monday’s session
  • US500 rallied more than 1% to come close to 2500
  • Broad based rally with all 11 major sectors higher

An avoidance of a further escalation in the North Korean geopolitical tension and early projections indicating that Hurricane Irma hasn’t caused as much damage as feared saw stock markets around the globe embark on a rally yesterday.  The US500 gaped higher on the open and after making steady gains really took off from the Wall Street open. Price rallied strongly from 2474 at 2:30pm (BST) and rarely looked back ending the cash session at 2485 - a record closing level.  

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 The US500 added to early gains yesterday on the Wall Street open and ended the US cash session at a record close of 2485. Source: xStation

During the Asian session price took out the prior all-time high at 2488 and around lunchtime made a record peak at 2490. Price is now just 10 handles from the psychological round level of 2500 and given the strength and breadth of the rally - all 11 major sectors joined in the push higher - we could well see this level reached sooner rather than later. 

We mentioned on Monday that leaks of the new iPhone had boosted Apple stock which rose back towards its own record high. The flagship device from Apple is the iPhone X which, according to the leak, will cost around $1000. Apple is now the largest component of the US500 and as such its performance can have a significant impact on the benchmark. It is now 10 years since the iPhone was first released and the popularity of the smartphone has contributed to an incredible rise in the firms stock price. Not only has Apple seen a strong rise but barring Microsoft and Exxon, all the top 10 firms by market cap were significantly smaller back in 2007.  

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 Apple was the 70th largest stock on the S&P500 (US500 on xStation) when the first iPhone was released. It is now the largest. Source: Bloomberg

Going back to 2007 the price of crude was soaring and energy firms had a much more prominent role amongst the largest firms on the US500. Exxon was the biggest of them all and has now slid to 10th, whilst PetroChina, Royal Dutch Shell, Gazprom and BP have all lost a substantial amount of ground. 

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 Energy shares have been the big losers over the same period with several of them falling from the top 10 to a much lower level of importance. Source: Bloomberg

 

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