The SPDR S&P 500 (SPY) has been in a strong uptrend this year, and the trend may continue if the Santa Claus rally happens. The fund, which has now become the second-biggest S&P 500 ETF after Vanguard, was trading at $597 on Monday. This article explains some of the top names in the S&P 500 and why ETFs like SPY, VOO, and IVV could reverse soon.
Top SPY ETF companies in 2024
The S&P 500 index has done well this year, helped by the artificial intelligence craze, strong corporate earnings, and the Federal Reserve rate cuts.
The AI wave has helped to push companies like NVIDIA, Microsoft, and Google substantially higher this year.
Vistra Energy has been the best-performing company in the S&P 500 index this year as it jumped by over 300%.
It was followed by Palantir and Nvidia, which have jumped by 276% and 174%, respectively. This rally has made NVIDIA the biggest company in the world, while Palantir’s market cap has jumped to $150 billion.
The other top performer in the index is GE Vernova whose shares have jumped sharply since it became a standalone company. Like Vistra, the rally is mostly because of the rising demand for energy prices to power data centers.
United Airlines stock has jumped by over 134% this year, making it the best-performing airline company in the US. It has also beaten its other global peers like IAG, Lufthansa, and KLM as it continues to boost its profits.
Constellation Energy stock price has jumped by 112% after the company partnered with Microsoft to restart a major nuclear power plant. The hope is that the firm will provide cheaper energy to power data centers.
Fair Isaac and Company, popularly known as FICO, has jumped by 102% as demand for credit scores continued rising. The other top performers in the S&P 500 index this year were companies like KKR, Dell, GoDaddy, Oracle, Royal Caribbean, Netflix, and Deckers Outdoor.
Walgreens Boots Alliance (WBA) was the worst-performing company in the S&P 500 index this year as it tumbled by 65%. The company is going through a rough patch as demand wanes and costs remains elevated.
Moderna shares have crashed by 56% as demand for the COVID-19 vaccine waned. Dolar Tree shares have retreated as comparable store sales have remained under pressure.
Intel is another top laggard in the S&P 500 index as demand for its products waned and as it lost market share in the AI industry.
The other worst-performing companies in the index are firms like Boeing, Biogen, Dexcom, Lululemon Athletica, and Humana.
S&P 500 index could reverse soon
There are a few reasons why the S&P 500 index ETFs like SPY, VOO, and IVV could suffer a sharp reversal soon.
First, there is a threat of a trade war, which will hurt most companies in the US. History shows that tit-for-tat has not always worked well for companies that have a presence around the world.
Second, the ETFs could drop because they have formed a rising wedge chart pattern. On the chart above, we see that the fund has formed two converging trendlines that are nearing their confluence levels.
In most periods, financial assets tend to have a deep decline when the two lines near their confluence levels. If this decline happens, then the SPY ETF will drop to about $550, which is about 10% below the current level.
Third, the index could drop because of a situation known as mean reversion, where assets often go back to their average prices. If this happens, then it may drop to the 200-day moving average of $540.
To be clear: such a correction will be brief, meaning that the index will bounce back as it has done in the past.
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