Investors energized as financial markets end 2023 up

NEW YORK — The S&P 500 closed out 2023 with a gain of more than 24% and the Dow finished near a record high, as easing inflation, a resilient economy and the prospect of lower interest rates buoyed investors, particularly in the last two months of the year.

Stocks closed Friday with modest losses.

The S&P 500 slipped 13.52 points, or 0.3%, to 4,769.83. The benchmark index still posted a rare ninth consecutive week of gains and is just 0.6% shy of an alltime high set in January of 2022.

The Dow Jones Industrial Average fell 20.56 points, or 0.1%, to 37,689.54 after setting a record Thursday.

The Nasdaq slipped 83.78 points, or 0.6%, to 15,011.35, but that was barely a blemish on an annual gain of more than 43%, its best performance since 2020.

For most of the year, gains in the broader market were driven largely by seven stocks -- Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta Platforms and Tesla. Dubbed the Magnificent 7, they accounted for about two-thirds of the gains in the S&P 500 this year, according to S&P Dow Jones Indices. Nvidia lead the group with a gain of about 239%, driven by the mania surrounding artificial intelligence.

A strong rally in November and December marked a big psychological shift for investors, said Quincy Krosby, chief global strategist at LPL Financial, because it went beyond the big technology companies. The Russell 2000 index of smaller companies jumped more than 20% over the two months and finished 2023 with a 15.1% gain after falling 21.6% in 2022.

“It was broad participation in the market that reinforced and confirmed gains for smaller company stocks that were particularly important,” Krosby said.

Investors in the US came into this year bearing the bruises of sharp losses for both stocks and bonds in 2022. They expected inflation to ease further as the Federal Reserve pushed interest rates higher. The tradeoff would be a weaker economy and possibly a recession. But while inflation has come down to around 3%, the economy has chugged along thanks to solid consumer spending and a healthy job market.