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After a stellar 2024, the S&P 500 has been on a bullish trend this year, too. The benchmark hit a new all-time high on Feb. 18. A combination of strong economic indicators, sector diversification, advancements in AI and solid corporate earnings season are driving the rally amid global trade war fears and uncertainty about the Fed's future rate cut plans (read: ETF Investors Crown a New King).
SPDR S&P 500 ETF Trust SPY, the proxy version of the S&P 500 Index, has gained 4% since the start of the year. While many stocks powered the ETF, we have highlighted five that have a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold). These are Palantir Technologies Inc. PLTR, CVS Health Corporation CVS, Constellation Energy Corporation CEG, Intel Corporation INTC and Tapestry Inc TPR. You can see the complete list of today’s Zacks #1 Rank stocks here.
The U.S. economy has demonstrated robust growth, bolstered by strong consumer confidence, declining unemployment rates, rising wages and positive manufacturing surveys. The rally has now broadened beyond the "Magnificent Seven" to other sectors like financials and industrials.
Significant investments in AI and related technologies have spurred optimism about future productivity gains and economic expansion. Companies are allocating substantial capital toward AI, anticipating long-term benefits that justify current valuations.
Further, this reporting cycle has been a good one, with the growth pace showing a notable accelerating trend and companies comfortably beating consensus estimates. Total earnings for 74% of the S&P 500 are up 12.1% from the same period last year on 5.6% higher revenues, with 77.8% beating EPS estimates and 64.6% beating revenue estimates. This is notably a better performance relative to other recent periods, particularly in terms of the growth pace.
The Fed kept the key interest rate steady in its last meeting following a series of rate cuts since September 2024. The central bank has signaled it’s in no rush to lower interest rates further as inflation remains elevated. This reflects looming concerns over future inflation and uncertainty about Trump’s trade tariff policies.
Let’s take a closer look at the fundamentals of SPY.
SPY in Focus
SPDR S&P 500 ETF Trust holds 503 stocks in its basket, with each accounting for no more than 8% of the assets. This suggests a nice balance across each security and prevents heavy concentration. The fund is widely spread across sectors with information technology, financials, consumer discretionary and healthcare accounting for a double-digit allocation each.
SPDR S&P 500 ETF Trust has an AUM of $633.1 billion and charges 9 bps in fees per year. It trades in an average daily volume of 40 million shares and has a Zacks ETF Rank #2 with a Medium risk outlook (see: all the Large Cap Blend ETFs here).
Below, we have highlighted the abovementioned five best-performing stocks in the ETF.