NEW YORK: The US stock market is off to a soaring start in 2024, as optimism over the economy and interest rate cuts has combined with exuberance about the business opportunity in artificial intelligence to stir up a potent cocktail for equities.

The S&P 500 has climbed more than 10% so far this year to post its biggest first-quarter gain since 2019. The benchmark index in late January hit its first record high in two years, as it built on a surge in late 2023, and has not looked back, setting more than a dozen highs without a significant pullback so far in 2024.

The tech-heavy Nasdaq Composite in late February also registered its first record high since November 2021.

Key to this year’s gains has been confidence from investors that the economy is set for a “soft landing”, in which inflation moderates but the economy avoids a severe downturn.

Nearly two-thirds of fund managers saw a soft landing as the most likely outcome for the economy in the next 12 months, while only 11% projected a “hard landing”, according to BofA Global Research’s latest monthly survey published in March.

A dovish Federal Reserve meeting this month, in which the central bank kept its view of three interest rate cuts this year while upgrading its economic outlook, has also encouraged many investors.

Stocks have been able to defy a rise in Treasury yields, after rising yields were a pressure point for equities in 2023. The yield on the benchmark 10-year Treasury was last around 4.2%, up from 3.86% at the end of last year.

“As Q2 kicks off, we still see a more supportive near-term backdrop for risk-taking....,” strategists at the BlackRock Investment Institute, which is overweight US stocks, said in a note this week. “We think upbeat risk appetite can broaden out beyond tech as more sectors adopt AI, and as market confidence is buoyed by recent Fed messaging and broadly falling inflation.” Such optimism has helped drive up stock valuations. The S&P 500’s forward price-to-earnings ratio has climbed to 21, its highest level in more than two years, according to LSEG Datastream.

The stock market continues to be propelled by some of the megacap companies that led the way in 2023.

But after all of the “Magnificent Seven” tech and growth stocks posted huge gains in 2023, this year has seen them go separate ways.

Nvidia continues to shine, surging more than 80% so far this year fueled by its gold-standard chips for AI. Meta Platforms is another big winner on the year, jumping 37%, with the Facebook parent issuing its first dividend in February.

Other megacaps have not fared so well. Apple shares have slipped 11%, with the iPhone maker hurt by pressure on its China business and from antitrust regulators. Tesla has tumbled 29%, hit by worries about electric vehicle demand.

The Magnificent Seven were responsible for 40% of the S&P 500’s year-to-date gain as of late last week, according to S&P Dow Jones Indices. That compares with a share of more than 60% last year for the megacap group.

Other stocks have helped pick up the slack this year, indicating the rally is broadening.

Tech and communication services - sectors that house a combined five of the Magnificent Seven - are among the top S&P 500 sectors so far this year. But energy , financials and industrials are also outperforming the S&P 500.