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The S&P 500 entered a new bull market, ending the longest bear streak since the 1940s. The surge in mega-cap tech stocks, easing inflation, stronger-than-expected corporate earnings, and hopes that the Fed is nearing the end of its interest rate-hike cycle have helped the index to recover from the lows seen in October last year.

SPDR S&P 500 ETF Trust (SPY - Free Report), the proxy version of the S&P 500 Index, has jumped about 12%. Nearly half the stocks in the index have declined, with most of the winners concentrated on the tech sector with just a small group of stocks, including Apple (AAPL), Microsoft (MSFT), Nvidia (NVDA - Free Report), Alphabet (GOOGL, GOOG), Amazon (AMZN), Meta Platforms (META - Free Report) and Tesla (TSLA - Free Report). Bank of America strategist Michael Hartnett calls these stocks the “Magnificent Seven,” which accounted for 90% of the gains in the S&P 500 so far this year.

The artificial intelligence (AI) boost has also pushed Marvell Technology (MRVL), and American Micro Devices (AMD - Free Report) higher. Apart from the tech sector, Royal Caribbean Cruises (RCL - Free Report) made it to the top five best-performing stocks on the index.

Additionally, corporate America’s shift of focus to structural benefits and booming AI will continue to drive the stock market higher. Further, an improving earnings picture and hopes of easing policy should also aid the S&P 500. According to CMEGroup's Fedwatch tool, markets are pricing in a 65% chance that the Fed will pause its historic interest rate hiking campaign in the June meeting.

Most Wall Street analysts recently raised their target price on the S&P 500 for this year for the second time in many weeks. The equity strategy team at RBC Capital Markets raised its year-end price target on the index to 4,250 from 4,100, while Bank of America gave a call for the S&P 500 to hit 4,300 by the end of the year.

Let’s take a closer look at the fundamentals of SPY.

SPY in Focus

SPDR S&P 500 ETF Trust holds 503 stocks in its basket, with each accounting for no more than 7.4% of assets. This suggests a nice balance across each security and prevents heavy concentration. The fund is widely spread across sectors with information technology, healthcare, financials and consumer discretionary accounting for a double-digit allocation each.

SPDR S&P 500 ETF Trust has AUM of $402.2 billion and charges 9 bps in fees per year. The product trades in a heavy volume of around 68 million shares a day on average, ensuring higher liquidity with a tight bid/ask spread, leading to lower trading costs for investors. SPY has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.

Below we have highlighted the above-mentioned five best-performing stocks in the ETF.

Best-Performing Stocks of SPY

Nvidia is the worldwide leader in visual computing technologies and the inventor of the graphic processing unit, or GPU. The stock has jumped 163.5% so far this year, and its earnings are expected to grow 123.3% for the fiscal year (ending January 2024).

Nvidia makes up for 2.6% of assets in QQQ and has a Zacks Rank #1 (Strong Buy).

Meta Platforms is the world’s largest social media platform. The company’s portfolio offering evolved from a single Facebook app to multiple apps like photo and video sharing apps, Instagram and WhatsApp owing to acquisitions. The stock has surged 120% so far this year and accounts for 1.6% of total assets.

META has an expected earnings growth rate of 21.4% for this year and has a Zacks Rank #1.

Tesla is the market leader in battery-powered electric car sales in the United States, with a roughly 70% market share. The stock makes up for 1.7% of assets in the SPY portfolio.

Tesla has gained 90.7% this year and has an expected earnings growth rate of 32.5% for next year. It has a Zacks Rank #3 (Hold).

Advanced Micro Devices has strengthened its position in the semiconductor market on the back of its evolution as an enterprise-focus company from a pure-bred consumer-PC chip provider. The stock has rallied 86.9% so far this year and makes up for 0.5% in the SPY portfolio.

Advanced Micro Devices has a Zacks Rank #3.

Royal Caribbean is a cruise company. It owns and operates three global brands — Royal Caribbean International, Celebrity Cruises and Azamara Club Cruises. The stock has gained 82.6% and accounts for 0.05% share in the SPY portfolio.

Royal Caribbean has an estimated earnings growth rate of 162.8% for this year and has a Zacks Rank #1.

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