Strong Earnings Growth from the “Magnificent Seven” Drives S&P 500 Gains

The “Magnificent Seven” are dominating the earnings growth in the S&P 500, with their aggregate earnings expected to soar 49% year over year. This strong showing is in stark contrast to the rest of the S&P 500 stocks, which are only on pace to see flat earnings growth this season, up 0.4%.

The standout performers among the Magnificent Seven include Meta Platforms, Alphabet, and Amazon, whose robust performance has been driving the overall growth. However, all eyes are now on Nvidia, which is set to report its results on May 22. The chipmaker’s earnings are expected to surge more than five times last year’s levels, making up more than one-third of the 7% earnings growth the entire S&P 500 is currently experiencing this season.

According to analysts, this year is all about earnings growth rather than valuation expansion. The broader market is expected to see positive earnings growth of about 10%, compared to last year’s 0% to 1%. This growth is anticipated to be driven by the back half of 2024, with a focus on unlocking value in cyclical parts of the market, especially midcaps.

Overall, the Magnificent Seven are leading the charge in the S&P 500’s earnings growth, showcasing their strength and resilience in a challenging market environment. Investors will be closely watching Nvidia’s upcoming earnings report to see if it can maintain the momentum and continue to fuel the overall growth of the index.