As part of the run-up of the major U.S. stock indices, the value of the S&P 500 has reached a record 2,874. If stocks continue to rally, it should reach the magic 3,000 market by year’s end.
A further run will require sharp improvement of the value of several tech shares that make up much of the value of the index, on a weighted basis. First among these is Apple, followed by Microsoft, Amazon and Facebook. Two non-tech stocks make up the balance of the companies with high S&P 500 rankings: Berkshire Hathaway and JPMorgan.
Of the four big tech stocks, only Facebook Inc. (NASDAQ: FB) is in trouble with investors. Concerns about privacy and the effect Facebook’s effort to address this may have on its ad business have worried investors. The huge social media company also may have helped outsiders affect U.S. elections. Facebook’s shares have sold off over the past three weeks, taking their value down 6%. The company has no ready argument that it can both calm the concerns of its members and potential erosion of its fast-growing revenue.
Apple Inc. (NASDAQ: AAPL), Microsoft Corp. (NASDAQ: MSFT) and Amazon.com Inc. (NASDAQ: AMZN) investors have reason to believe that improvement in their share prices will continue. Evidence of Amazon’s dominance of the e-commerce market and its successful Prime program’s growth jump with each new earnings announcement. Its cloud business holds the top market share among all providers of the services.
Microsoft also has shown its cloud business holds a large share of the market, and its traditional software business continues to dominate computer and server operating software.
Optimism about Apple has shifted in part from iPhone sales to its growing services business. In the most recent quarter, revenue from this division of Apple was $9.5 billion of Apple’s total $53.3 billion total.
Unless outside forces such as a trade war dent the overall market, an S&P break above 3,000 is very likely.