Earnings growth would be quite pedestrian for S&P 500 without 26% increase from the Mag 7

2 days ago

With roughly two-thirds of the earnings season behind us, one thing is clear: Growth numbers would not look as good as they do without the "Magnificent Seven." Goldman Sachs chief U.S. equity strategist David Kostin found that the group's year-over-year earnings growth in the second quarter is running at 26%. That figure incorporates estimates for Nvidia , which is set to report results at the end of the month. The other Mag 7 members — Meta Platforms , Amazon , Tesla , Alphabet , Microsoft and Apple — have already posted second-quarter earnings. The rest of the S & P 500 is not doing so hot. Kostin noted that year-over-year earnings for all the other stocks in the benchmark index combined is running at just 4%. That includes results from companies that have reported and estimates from those that haven't. "Results so far have also reflected the continued earning exceptionalism of the mega-cap tech stocks, which represent one of the key sources of upside risk to S & P 500 earnings estimates," wrote Kostin. .SPX YTD mountain SPX year to date This disparity is another sign of investors increasingly crowding into just a handful of stocks. Indeed, these names have proven resilient despite a backdrop of rising U.S. tariffs and recently shaky jobs data. Six of the Mag 7 stocks — Meta, Microsoft, Nvidia, Tesla, Amazon and Alphabet — are higher since April 2, when President Donald Trump unveiled steep tariff increases on imported goods. Those gains helped the S & P 500 recover from near bear-market territory to trade back at record levels. Of the group, only Apple has declined. The problem with such concentration is that if some of those seven names begin to falter, they will take down the broader market. "We view the S & P 500 as caught in an AI-induced bubble vs bull market paradox," wrote Citigroup strategist Scott Chronert in a Friday note. "Our leaning is toward the latter. But the path to a structural bull market is not a straight one." "The past two years of this bull run have been led by the direct beneficiaries of the build out in AI capabilities. This is likely to persist for the foreseeable future. But eventually, a handoff will need to happen whereby Tech/AI users reap the benefits of current AI promise via more durable growth and profitability metrics," he added.

Hashtags

Try Our AI Features

Explore what Daily8 AI can do for you:

Comments

No comments yet...

Stocks higher with eyes on earnings, US tariff deadline

Yahoo

12 minutes ago

Yahoo

Stocks higher with eyes on earnings, US tariff deadline

Wall Street stocks rebounded Wednesday led by Apple and other large tech companies as markets largely shrugged off US President Donald Trump's latest tariff hikes. Apple piled on more than five percent after White House officials said the tech giant plans an additional $100 billion in capital spending in the United States. Amazon and Google parent Alphabet were among the other large tech names that also rose. Dozens of economies around the world including the European Union and India are set to face higher US tariffs on Thursday, as US President Donald Trump's long-threatened "reciprocal" duties over trade practices he deems unfair take effect. Trump also on Wednesday ordered an additional 25-percent tariff on Indian goods over New Delhi's continued purchase of Russian oil, a key revenue source for Moscow's war in Ukraine. Separate 50-percent US tariffs on Brazilian imports came into place Wednesday, with significant exemptions, after Trump targeted Latin America's biggest economy over its prosecution of former president Jair Bolsonaro. But Wall Street equities spent most of the day firmly in positive territory. The tech-rich Nasdaq finished up 1.2 percent to 21,169.42, less than 10 points from an all-time record. "This is a market that's fueled by enthusiasm," said Jack Ablin of Cresset Capital Management. "Nothing has blown up yet. Perhaps the impact of tariffs won't be as great as investors originally feared." Earlier, Europe's main markets also finished the day with gains. European investors are "in a relatively confident mood following a US-EU trade deal that eases concerns around tomorrow's tariff headline", said Joshua Mahony, chief market analyst at Rostro trading group. Markets are "heavily focused on the likes of India and Switzerland," which have yet to reach a final agreement with Washington, he added. Elsewhere, oil prices gyrated as markets tried to determine the latest Russia developments, with Trump saying late Wednesday that there was a high probability of a summit with his Russian counterpart Vladimir Putin in the near future. Oil prices finished down more than one percent, while the dollar slid against its main rival currencies. In company news, shares in Danish drug giant Novo Nordisk fell 5.4 percent. The group reported a sharp rise in second-quarter net profit, but rising competition is hitting sales of its diabetes and obesity treatments Ozempic and Wegovy in the United States. In London, shares in Swiss mining and commodity giant Glencore shed 4.0 percent after it posted widening first-half losses on falling coal prices, US tariffs and Middle East tensions. Disney fell 2.7 percent as it reported around a doubling of profits to $5.3 billion and announced a series of new deals to boost its upcoming ESPN streaming venture. But McDonald's jumped 3.0 percent as it reported an 11-percent rise in profits to $2.3 billion. While the fast food giant returned to sales growth at US stores, it warned that low-income consumers were cutting back amid financial pressures. - Key figures at around 2120 GMT - New York - Dow: UP 0.2 percent at 44,193.12 (close) New York - S&P 500: UP 0.7 percent at 6,345.06 (close) New York - Nasdaq Composite: UP 1.2 percent at 21,169.42 (close) London - FTSE 100: UP 0.2 percent at 9,164.31 (close) Paris - CAC 40: UP 0.2 percent at 7,635.03 (close) Frankfurt - DAX: UP 0.3 percent at 23,924.36 (close) Tokyo - Nikkei 225: UP 0.6 percent at 40,794.86 (close) Hong Kong - Hang Seng Index: FLAT at 24,910.63 (close) Shanghai - Composite: UP 0.5 percent at 3,633.99 (close) Euro/dollar: UP at $1.1659 from $1.1575 on Tuesday Pound/dollar: UP at $1.3358 from $1.3299 Dollar/yen: DOWN at 147.38 yen from 147.62 yen Euro/pound: UP at 87.23 pence from 87.04 pence Brent North Sea Crude: DOWN 1.1 percent at $66.89 per barrel West Texas Intermediate: DOWN 1.2 percent at $64.35 per barrel burs-jmb/jgc

Trump says he plans to put a 100% tariff on computer chips, likely pushing up cost of electronics

Boston Globe

44 minutes ago

Boston Globe

Trump says he plans to put a 100% tariff on computer chips, likely pushing up cost of electronics

Inquiries sent to chip makers Nvidia and Intel were not immediately answered. Demand for computer chips has been climbing worldwide, with sales increasing 19.6 percent in the year-ended in June, according to the World Semiconductor Trade Statistics organization. Advertisement Trump's tariff threats mark a significant break from existing plans to revive computer chip production in the United States. He is choosing an approach that favors the proverbial stick over carrots in order to incentivize more production. Essentially, the president is betting that higher chip costs would force most companies to open factories domestically, despite the risk that tariffs could squeeze corporate profits and push up prices for mobile phones, TVs and refrigerators. By contrast, the bipartisan CHIPS and Science Act signed into law in 2022 by then-President Joe Biden provided more than $50 billion to support new computer chip plants, fund research and train workers for the industry. The mix of funding support, tax credits and other financial incentives were meant to draw in private investment, a strategy that Trump has vocally opposed. Advertisement

Wall Street gains, as oil ends lower in volatile trade

NBC News

an hour ago

NBC News

Wall Street gains, as oil ends lower in volatile trade

Wall Street indexes gained on Wednesday on largely upbeat corporate earnings, and U.S. yields also rose, while European shares closed flat and broke a two-day winning streak. U.S. President Donald Trump issued an executive order imposing an additional 25% tariff on goods from India, saying the country has imported Russian oil. Oil prices seesawed and finished down, as Trump's remarks about progress in talks with Moscow created uncertainty on whether the U.S. would impose new sanctions on Russia. MSCI's gauge of stocks across the globe rose 0.65% to 933.23. On Wall Street, the Nasdaq Composite led gains, rising 1.21% to 21,169.42 as Apple shares climbed after news of its plans to announce a domestic manufacturing pledge. The Dow Jones Industrial Average rose 0.18% to 44,193.12 and the S&P 500 rose 0.73% to 6,345.06. 'Earnings are seeing a mixed reaction. Particularly for a few of the AI names, expectations were just extremely high, but by and large, the earnings in aggregate have been good enough to keep a floor under the market,' said Ross Mayfield, investment strategy analyst at Baird. Europe's broad STOXX 600 index closed 0.06% lower, dragged down by healthcare stocks after Trump announced a tariff plan for the pharmaceutical sector. MSCI's broadest index of Asia-Pacific shares outside Japan closed lower by 0.08% to 654.33, while Japan's Nikkei rose 0.60% to 40,794.86. The health of the U.S. economy is a major focus for markets, and Wall Street closed lower on Tuesday after data showed services sector activity unexpectedly flatlined in July. That reinforced the message from Friday's soft jobs data, which caused markets to significantly increase bets on the Federal Reserve cutting rates in September. 'There's this tug-of-war going on between the more concrete signs that we have seen that the U.S. economy is slowing and the fact that rate cuts are coming, which removes some of the pressure on valuations,' said Samy Chaar, chief economist at Lombard Odier. Traders have been focused on tariff impacts. 'The market is more focused on the fact that we're not getting maximalist tariffs, but I wonder if it isn't focusing enough on the fact that we are still getting something moderate, and more could be coming, pharmaceuticals for example,' Chaar said. Trump on Tuesday said he would announce tariffs on semiconductors and chips in the next week or so, while the U.S. would initially impose a 'small tariff' on pharmaceutical imports before increasing it substantially in a year or two. He said the U.S. was close to a trade deal with China, and he would meet his Chinese counterpart Xi Jinping before the end of the year if an agreement was struck. Brazil's government has filed a consultation request at the World Trade Organization over U.S. tariffs. In the government bond market, Treasury yields gained ground. The yield on benchmark U.S. 10-year notes rose 3.4 basis points to 4.23%, from 4.196% late on Tuesday. The yield on the benchmark German 10-year Bunds DE10YT=RR rose 0.2 basis points to 2.644%, from 2.642% late on Wednesday. Fed funds futures imply a 94% chance of a rate cut next month, with at least two cuts priced in for this year, according to the CME's FedWatch. Investors are waiting for Trump's pick to fill a coming vacancy on the Fed board of governors. Trump said the decision will be made soon, while ruling out Treasury Secretary Scott Bessent as a contender to replace current chair Jerome Powell, whose term ends in May 2026. The euro was up 0.68% at $1.1653. The dollar index, which measures the greenback against a basket of currencies, fell 0.5% to 98.24. Brent crude futures fell 75 cents, or 1.1%, to settle at $66.89 a barrel, while U.S. crude dropped 81 cents, or 1.2%, to settle at $64.35.