2024-01-29 17:13:29 ET
Summary
- Surprising Q4 earnings weakness continues to spread in S&P 500 components, with a 1.4% year-over-year decline expected for Q4 2023.
- Even Tesla couldn't hold up. Tesla's failure to meet sky-high earnings expectations prompted analysts to quickly rename the "Magnificent Seven" into the "Spectacular Six."
- With investor sentiment maximum-bullish, blowout big tech earnings are crucial for sustaining the market rally with valuations well out of line with historical norms.
- Five of the "Spectacular Six" tech stocks report earnings this week, wrapping around Wednesday's highly anticipated FOMC meeting.
Early last week, I penned an article detailing surprising levels of Q4 earnings weakness in S&P 500 components. I titled the article " No One Is Talking About This " because the S&P 500 ( SPY ) continues to charge higher as if everyone has their earmuffs on – even while earnings and the underlying business cycle are turning. Seventy-five more S&P 500 companies reported earnings last week, confirming that the weakness wasn't just confined to bank stocks and a few odd healthcare and industrial names. Q4 2023 earnings are now estimated to have fallen about 1.4% year-over-year, a far cry from the Fed pivot and Chat GPT-driven earnings boom that analysts have called for. However, the S&P 500 is up about 22% over the last year. Falling earnings don't jibe with skyrocketing stock prices – it's a red flag that usually only happens in short-lived bubbles. Nearly all of the rally has occurred in the past three months, with stocks seemingly ignoring business fundamentals on the hopes that a Fed pivot will bail the market out....
Read the full article on Seeking Alpha
For further details see:
S&P 500 Earnings Weakness Spreads: Will The 'Spectacular Six' Save The Bull Market?