Momentum, growth fuel 10.5% April rally in S&P 500

Momentum and growth stocks powered a 10.5% rally in the S&P 500 in April. The S&P 500 Momentum index climbed 19.3% and the S&P 500 Pure Growth index rose 16%, according to S&P Global data.

The April advance was the S&P 500’s strongest month since November 2020 and one of the largest monthly gains in the past decade. Large technology companies reported strong earnings during the month, and investor demand increased for higher-beta, growth-oriented names. Market commentary also referenced optimism around artificial intelligence as a factor in megacap performance.

Factor returns showed wide dispersion. Only four of 17 factor indices outperformed the S&P 500 in April. The S&P 500 Momentum index led the pack, beating the broad index by 8.8 percentage points. The S&P 500 Pure Growth and S&P 500 High Beta indices outperformed the benchmark by 5.8 and 5.5 percentage points, respectively.

Defensive strategies lagged. The S&P 500 Low Volatility Index trailed the benchmark by 8.5 percentage points, the largest shortfall among factor indices. The S&P Low Volatility High Dividend Index produced a 2.1% total return for the month. Dividend-focused and quality-oriented factor indices also underperformed the S&P 500.

Mega-cap technology names accounted for a large share of the index’s gain but were not the sole source of returns. The group commonly referred to as the Magnificent Seven contributed about 5.1 percentage points of the S&P 500’s 10.5% advance. Data show 23.2% of S&P 500 constituents outperformed the index in April. The top factor indices held underweights to the Magnificent Seven in the range of roughly 14.9% to 28.4%, and most relative gains in those factor indices came from stocks outside the largest megacaps.

Sector and market-cap breadth included midcap and large-cap growth components in technology, industrials and consumer discretionary, which recorded notable gains. S&P Dow Jones Indices data indicate the high beta factor amplified returns for more volatile stocks during the month.