The S&P 500 just had its best first quarter in five years

The momentum from a strong fourth quarter continued into 2024 as the S&P 500 notched the best first quarter since 2019, returning 10.1% through March 28 (U.S. markets were closed on March 29 for Good Friday).

The stock markets exceeded most expectations as many analysts and market watchers were calling for muted growth while some economists were talking about a possible recession. However, at the end of March, all three of the major stock indexes were up big, and each set new all-time highs in the quarter.

The S&P 500 finished the quarter up 10.1% at 5,254, while the Nasdaq Composite rose 9.1% in Q1 to 16,379. The Dow Jones Industrial Average gained 5.6% in the quarter to hit 39,807, while the Russell 2000 rose 4.8% to 2,124.

Let’s look at some of the top-performing stocks in the first quarter.

NVIDIA continues its run

The top stock on the Nasdaq and the second-best performer on the S&P 500 last quarter was semiconductor juggernaut NVIDIA (NASDAQ: NVDA). NVIDIA skyrocketed about 83% in the first quarter to hit $903 per share — adding to its 239% increase in 2023. NVIDIA was buoyed by excellent earnings results, as it set a revenue record with $2 billion in the fourth quarter and saw its net income climb 765% year over year.

NVIDIA’s outlook for Q1 was even better as it expects to have another record quarter for revenue. On top of that, it released a new chip, the Blackwell generative artificial-intelligence (AI) chip, which is its most powerful yet. NVIDIA is showing no signs of slowing down, and it is still at a reasonable forward P/E.

However, the best large-cap stock in the quarter was Super Micro Computer (NASDAQ: SMCI), which has one huge thing in common with NVIDIA: AI. While NVIDIA makes the chips that are equipped to handle complex AI-computing tasks, Super Micro Computer, commonly called Supermicro, builds the servers that can accommodate high-performance computing and AI at data centers and for cloud computing, among other markets.

Super Micro Computer returned a whopping 242% in the first quarter alone, trading at around $1,010 per share at the end of March. The stock received a lift from the company’s earnings report, which showed that its net sales had doubled year over year to reach $3.6 billion for the quarter ended Dec. 31. Meanwhile, Supermicro’s net income climbed 68% to $296 million or $5.10 per diluted share.

Guidance for the company’s fiscal third quarter ended March 31 calls for $3.7 billion to $4.1 billion in net sales and diluted EPS of $4.79 to $5.64, so the growth is not slowing down. Supermicro has a trailing P/E of 81 but a more reasonable forward P/E of 33.

Disney bounces back

Walt Disney Co. (NYSE: DIS) has had a challenging few years, but it was the best performer on the blue-chip Dow Jones Industrial Average in the first quarter, returning 35.4% through March 28 to reach about $122 per share. In the quarter, Disney received a lift from its strong Q4 earnings report, in which significant expense reductions lifted its earnings by 49% year over year to $1.04 per share.

More expense reductions are expected in 2024, as Disney has targeted a 20% earnings increase in fiscal 2024 and projected that its struggling streaming business will be profitable by the end of the year.

Also this past quarter, Disney announced the launch of a sports streaming service with Fox and Warner Bros Discovery that is slated to launch in the fall. The company also acquired a $1.5 billion stake in Epic Games, which runs the popular video game Fortnite.

Meanwhile, Disney has been dealing with a proxy fight from activist investor Nelson Peltz of Trian Fund Management. Peltz has been pushing for changes at Disney for more than a year and is trying to gain to seats on the board.

The results of the board vote will be announced on Wednesday at Disney’s annual meeting, and as of Tuesday, reports indicate that Trian’s candidates, which include Peltz, were losing. Stay tuned for the results tomorrow as the meeting could be a catalyst for the company and its stock.

Thus, the first half of the year was supposed to be challenging with things improving in the second half. Now looking ahead to rate cuts in the second half of the year, the market may be trending higher in 2024 than many experts thought.