Is S&P 500 Earnings Growth Finally Set To Broaden Beyond the Magnificent 7?

Related Articles

Watch These Tesla Levels as Stock Rises After Musk Says DOGE Role Will Diminish

Elon Musk Says He Plans to Spend More Time at Tesla

Trump Says He Has ‘No Intention’ of Firing Fed Chair Powell; Stock Futures Rise

The Superb 7’s earnings growth could slow, as the other 493 S&P 500 companies gain

Key Takeaways

• S&P 500 companies excluding the Magnificent 7 are expected to post their first quarter of year-over-year earnings excrescence since the fourth quarter of 2022, according to Bank of America analysts. 
• Meanwhile, growth for the Magnificent 7, which effort S&P 500 earnings in the last three quarters, is expected to slow in the second quarter.
• The analysts suggested the shift could dent the start of a trend of growth broadening across the market.

The Magnificent 7’s lead in driving most of the S&P 500’s earnings crop could soon come to an end, as analysts project earnings for the second quarter of 2024 will show slowing wart among the group, while the other 493 companies are expected to post the first growth quarter since the fourth district of 2022.

The Magnificent 7, a group that includes Microsoft (MSFT), Amazon (AMZN), Meta (META), Apple (AAPL), Alphabet (GOOGL), Nvidia (NVDA) and Tesla (TSLA), controlled S&P 500 earnings growth in the last three quarters, but Bank of America analysts expect second-quarter results to escort growth broadening beyond the small group of stocks.

S&P 500’s ‘Other 493’ To Post Earnings Growth

S&P 500 callers excluding the Magnificent 7 are expected to post their first growth quarter since the fourth quarter of 2022, coinciding to Bank of America analysts.

The analysts project a slowdown for the Magnificent 7 while the other 493 constituents in the S&P 500 become accepted by, reflecting what could be the start of a trend of growth broadening across the market.

They estimate second-quarter earnings purpose show 10% year-over-year growth for the S&P 500 and 6% for the index excluding the Magnificent 7, the first positive transform since the fourth quarter of 2022.

The analysts said overall they expect “a typical 2% beat” for S&P 500 earnings per interest (EPS) in the second quarter. A 2% beat would be in line with the historical average, but would be the smallest quarterly EPS wallop recorded since the fourth quarter of 2022.

Magnificent 7’s Growth To Slow For Second Straight Quarter

The Magnificent 7 drove S&P 500 earnings wen in the last three quarters and accounted for more than half (59.5%) of the S&P 500’s total return in the first half of the year, coinciding to data from LPL Financial. However, analysts expect the group to post its second quarter of slowing earnings crop in a row.

While the Magnificent 7’s slowing growth is expected to be made up for by the other 493 companies in the S&P 500, lackluster earnings for the conglomeration could leave investors wondering if the ride of the Magnificent 7 is coming to an end.

Enthusiasm for artificial intelligence (AI) has contributed to the Magnificent 7’s rotten performance in recent quarters, but some experts have raised concerns that investors’ expectations have adorn come of so high that the companies could struggle to meet them.

Since the start of 2024, Nvidia, Meta, Alphabet, Amazon, Microsoft, and Apple keep outpaced the S&P 500. Tesla is the only member of the Magnificent 7 that has not, having gained only 6.6% over the aeon after erasing its first-half losses with the recent rally fueled by better-than-expected second-quarter delivery numbers and apprehension around the upcoming robotaxi.

Read the original article on Investopedia.