The stock market is still all about technology.
New data from FactSet shows that while strategists are looking for more market upside, they expect Big Tech companies to lead the S&P 500's fourth-quarter earnings growth.
Profits for Apple (AAPL), Alphabet (GOOGL, GOOG), Microsoft (MSFT), Amazon (AMZN), Meta (META), and Nvidia (NVDA) are expected to increase a combined 53.7% in the fourth quarter. The other 494 companies in the S&P 500 are expected to decline 10.5%.
Five of these companies, Apple, Alphabet, Microsoft, Amazon, and Meta, are scheduled to report their quarterly results this week.
After Tesla (TSLA), the last of the Magnificent Seven, was disappointed in its reports, Evercore ISI Managing Director Julien Emanuel said that the stock price reaction to these reports was “indicative of the overall direction of the market.'' “It's extremely important for sexuality.”
Expectations for some names are very high. Nvidia is expected to increase its earnings per share by more than 400% compared to the same period last year. Analysts expect Meta's earnings per share to increase 175% from a year ago.
The impressive growth of some of the market's biggest players is expected to continue into the next quarter. His second graph from FactSet shows that he expects Amazon, Alphabet, Meta, and Nvidia to grow his revenue by nearly 80% in the first quarter of 2024. The other 496 companies, including Apple, Microsoft, and Tesla, are expected to see revenue increases of nearly 80%. Total 0.3%.
“Their returns are incredible compared to other markets,” IG North America CEO JJ Kinahan said on Yahoo Finance Live. “You don't often see situations where a few stocks outperform the rest of the market to this extent.”
For some on Wall Street, these huge profit expectations help explain why the S&P 500, despite hitting new all-time highs, remains not overvalued.
“There’s more growth there. [S&P 500] “Valuations are higher now than they have been in the past,” said Drew Pettit, Citi's director of U.S. equity strategy, nodding to technology's improved position in the index.
There is a simple reason why investors pay attention to these earnings reports. During the recent market rally in January, the same tech companies, excluding Tesla, drove nearly 90% of the growth, according to an analysis by Yahoo Finance's Jared Blikre. This happened after seven tech companies led the market in 2023.
Still, earnings estimates for tech companies go beyond just quarterly numbers. Earnings releases also include updates on the various market-moving stories.
Artificial intelligence is at the heart of Meta and Nvidia's revenue improvement. Microsoft and Amazon also have AI businesses, but their cloud revenue typically comes under more scrutiny. Additionally, Apple's product business can provide a lens into the overall picture of hardware demand and consumer spending.
All of this combines to make tech company profits extremely important to the market. Not only do people expect Big Tech companies to do well, but if a company's performance falls short of expectations, the lagging parts of the company could signal warning signs of an economic slowdown. .
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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