By Philip van Doorn
The big winners included Nvidia, AMD, Tesla and Amazon.
(Updated with Friday's closing prices.)
The 2023 rally for stocks in the U.S. accelerated as more investors bought the idea that the Federal Reserve succeeded in its effort to bring inflation to heel.
The S&P 500 SPX ended Friday with a 24.2% gain for 2023, following a 19.4% decline in 2022. (All price changes in this article exclude dividends). Among the 500 stocks, 65% were up for 2023. Below is a list of the year's 20 best performers in the benchmark index.
This article focuses on large-cap stocks. MarketWatch Editor in Chief Mark DeCambre took a broader look at all U.S. stocks of companies with market capitalizations of at least $1 billion, to list 10 with gains ranging from 412% to 1,924%.
The Fed began raising short-term interest rates and pushing long-term rates higher in March 2022 by allowing its bond portfolio to run off. That explains the poor performance for stocks in 2022, as bonds and even bank accounts because more attractive to investors.
The central bank hasn't raised the federal-funds rate since moving it to the current target range of 5.25% to 5.50% in July, and its economic projections point to three rate cuts in 2024.
Investors are anticipating the return to a low-rate environment by scooping up 10-year U.S. Treasury notes BX:TMUBMUSD10Y, whose yield ended the year at 3.88%, down from 4.84% on Oct. 27 - the day of the S&P 500's low for the second half of 2023.
Read: Treasury yields end mostly higher but little changed on year after wild 2023
Before looking at the list of best-performing stocks of 2023, here's a summary of how the 11 sectors of the S&P 500 performed, with the full index and three more broad indexes at the bottom:
Sector or index 2023 price change 2022 price change Price change since end of 2021 Forward P/E Forward P/E at end of 2022 Forward P/E at end of 2023 Information Technology 56.4% -28.9% 11.5% 26.7 20.0 28.2 Communication Services 54.4% -40.4% -7.6% 17.4 14.3 21.0 Consumer Discretionary 41.0% -37.6% -11.4% 26.2 21.7 34.7 Industrials 16.0% -7.1% 8.0% 20.0 18.7 22.0 Materials 10.2% -14.1% -4.9% 19.5 15.8 16.6 Financials 9.9% -12.4% -3.4% 14.6 13.0 16.3 Real Estate 8.3% -28.4% -21.6% 18.3 16.9 24.7 Healthcare 0.3% -3.6% -3.3% 18.2 17.7 17.3 Consumer Staples -2.2% -3.2% -5.4% 19.3 20.6 21.4 Energy -4.8% 59.0% 51.8% 10.9 9.8 11.1 Utilities -10.2% -1.4% -11.4% 15.9 18.7 20.4 S&P 500 24.2% -19.4% 0.4% 19.7 16.8 21.6 Dow Jones Industrial Average 13.7% -8.8% 3.8% 17.6 16.6 18.9 Nasdaq Composite 43.4% -33.1% -3.5% 26.9 22.6 32.0 Nasdaq-100 53.8% -33.0% 3.5% 26.3 20.9 30.3 Source: FactSet
A look at 2023 price action really needs to encompass what took place in 2022 for context. The broad indexes haven't moved much from their levels at the end of 2022 (again, excluding dividends). We have included current forward price-to-earnings ratios along with those at the end of 2021 and 2022. These valuations have declined a bit, which may provide some comfort for investors wondering how likely it is for stocks to continue to rally in 2024.
Biggest price increases among the S&P 500
Here are the 20 stocks in the S&P 500 whose prices rose the most in 2023:
Company Ticker 2023 price change 2022 price change Price change since end of 2021 Forward P/E Forward P/E at end of 2022 Forward P/E at end of 2021 Nvidia Corp. NVDA 239% -50% 68% 24.9 34.4 58.0 Meta Platforms Inc. Class A META 194% -64% 5% 20.2 14.7 23.5 Royal Caribbean Group RCL 162% -36% 68% 14.3 14.9 232.4 Builders FirstSource Inc. BLDR 157% -24% 95% 14.2 10.7 13.3 Uber Technologies Inc. UBER 149% -41% 47% 56.9 N/A N/A Carnival Corp. CCL 130% -60% -8% 18.7 41.3 N/A Advanced Micro Devices Inc. AMD 128% -55% 2% 39.7 17.7 43.1 PulteGroup Inc. PHM 127% -20% 81% 9.1 6.3 6.2 Palo Alto Networks Inc. PANW 111% -25% 59% 50.2 38.0 70.1 Tesla Inc. TSLA 102% -65% -29% 66.2 22.3 120.3 Broadcom Inc. AVGO 100% -16% 68% 23.2 13.6 19.8 Salesforce Inc. CRM 98% -48% 4% 28.0 23.8 53.5 Fair Isaac Corp. FICO 94% 38% 168% 47.1 29.3 28.7 Arista Networks Inc. ANET 94% -16% 64% 32.7 22.3 41.4 Intel Corp. INTC 90% -49% -2% 26.6 14.6 13.9 Jabil Inc. JBL 87% -3% 81% 13.5 7.9 10.3 Lam Research Corp. LRCX 86% -42% 9% 25.2 13.5 20.2 ServiceNow Inc. NOW 82% -40% 9% 56.0 42.6 90.1 Amazon.com Inc. AMZN 81% -50% -9% 42.0 46.7 64.9 Monolithic Power Systems Inc. MPWR 78% -28% 28% 49.1 27.3 57.9 Source: FactSet
Click on the tickers for more about each company.
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Don't miss: Nvidia tops list of Wall Street's 20 favorite stocks for 2024
-Philip van Doorn
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12-30-23 0605ET
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