Source: Barron's
Author: Theresa Rivas
In the first quarter of this year,$S&P 500 Index (.SPX.US)$It hit 22 new closing highs, up more than 10%. This is the 11th time since 1950 that the index has risen by more than 10% in the first quarter.
There are many factors that fuel investors' optimism, such as encouraging economic data, etc., and these factors have prompted investors to raise their expectations for the company's profits, especially for soaring technology companies. Major banks will be the first to kick off the first quarter earnings season this weekend. Some companies may fall short of expectations, but most companies will probably live up to investors' expectations.
Analysts are optimistic about the big tech companies' performance. Jessica Rabe (Jessica Rabe), co-founder of DataTrek Research, notes that in addition to$Apple (AAPL.US)$und$Tesla (TSLA.US)$The performance expectations of other technology companies in the “Big Seven” have all been raised, not only for the first quarter, but also for the whole of this year and the whole of next year.
Labbé pointed out that in the past 90 days, analysts raised the “Big Seven” earnings forecast per share for the first quarter by 5.5%. If Tesla is not included, this figure will be more than 10%. Analysts raised the “Big Seven” earnings estimates for 2024 and 2025 by more than 3% per share.
Labbé pointed out that this is in stark contrast to the S&P 500 index's overall earnings per share forecast. Analysts lowered the index's overall earnings per share forecast for the first quarter by about 2.7%, and expectations for this year and next have remained largely unchanged.
“Despite rising interest rates this year, the fundamentals of most big tech companies are far better than the overall fundamentals of the S&P 500 index,” Labbé said.
Given that the “Big Seven” have risen by double digits so far this year (with the exception of Apple and Tesla), they are under pressure to hand over a beautiful report card.
However, they — and other big companies — may be up to the task.
Chris Senyek (Chris Senyek) of Wolfe Research pointed out that due to factors such as rising oil prices and uncertainty about the timing of interest rate cuts, investors should be wary that the next trend in the stock market may be more turbulent than in the first quarter.
Despite this, Sayek believes that “the stock market will not continue to decline unless the market begins to anticipate that the future economy and earnings per share will fall far short of expectations.”
Wolf still expects the S&P 500's overall earnings per share for the full year of this year to be 245 US dollars, which is slightly higher than the general market expectation of 244 US dollars. Sayek expects that “the company's performance and guidance given by management during the first quarter earnings season will be very stable.”
Sayek also pointed out that in addition to technology companies, profit expectations for companies in the semiconductor, equipment, automotive, financial, and consumer services sectors have also been raised. When the economy accelerates growth, cyclical stocks tend to lead the way.
Labbé of DataTrek Research believes that as long as big tech stocks “continue to hand over satisfactory reports, most of these stocks should continue to outperform the market and drive the S&P 500 index upward because they have a lot of weight in the index. Rabe said, “We believe that even if interest rate fluctuations increase, investors' confidence in the fundamentals of big tech stocks should continue to support their rise.”
To paraphrase Lucy Maud Montgomery (Lucy Maud Montgomery), author of “Anne of Green Gables” (Anne of Green Gables), nothing seems impossible this spring. For a stock market that has continued to rise this year, this includes hope that the stock market will continue to rise.
Editor/jayden