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Why Did the S&P 500 and Dow Rise to Fresh Record Highs?

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Dec. 4 2020, Updated 10:53 a.m. ET

S&P 500

After rising to record high price levels last week, the S&P 500 carried the buying momentum to this week. It opened stronger this week by rising on Monday. The S&P 500 strengthened as the week progressed. On September 20, the S&P 500 was volatile but managed to close the day with gains. On Wednesday, seven out of the 11 major sectors moved higher. Strength in the energy and industrials sectors pushed the market higher. On the other hand, weakness in the utilities and consumer staples sectors limited the upward movement.

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Market drivers

Last week, the market rose amid the improved market sentiment. Global market concerns calmed down and allowed the risk appetite to recover. The market started this week amid increased expectations of one more interest rate hike in 2017. The FOMC statement increased the chances of another interest rate hike by the end of the year and supported the markets. On Wednesday, the Fed signaled that there might be an interest rate hike in December. The Fed also gave details about the balance sheet reduction. According to the announcement, the Fed will unwind its $4.5 trillion balance sheet “gradually and predictably.”

Volatility

On September 20, the S&P 500 opened the day on a stronger note and ended the day at fresh record high price levels. The CBOE Volatility Index (or VIX) measures uncertainty in the market. On September 20, it fell 3.9% to 9.78. The VIX is measured on a scale of one to 100 with 20 as the historical average. The VIX is also called the “fear index.” It usually has an inverse relationship with stocks and rises when the S&P 500 falls.

NASDAQ and Dow

The NASDAQ and Dow started the day with a lower risk appetite ahead of the FOMC statement. Amid weakness in the IT sector, the tech-heavy NASDAQ Composite Index closed the day at 6,456.04 with a loss of 0.08%. The Dow Jones Industrial Average rose 0.19% and closed at 22,412.59—a fresh record high.

In the next part, we’ll discuss the S&P 500’s top gainers on September 20.

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