According to FactSet, 67% of S&P 500 companies have reported their fourth-quarter earnings so far, with 75% reporting positive earnings surprises and 65% reporting positive sales or revenue surprises. The blended earnings increase over the comparable 2022 quarter is +2.9%, almost twice the expected growth rate (+1.5%) analysts had expected on December 31, so I’d say this earnings season is worth celebrating.
There is also a big leadership change underway, as the Magnificent Seven stocks that have dominated the S&P 500 and NASDAQ 100 are getting tired. Specifically, only three of those seven stocks delivered great earnings announcements, so money is on the move. Nvidia is unquestionably the new market leader, with Super Micro Computer now closing in on Nvidia this year, after delivering outstanding results and guidance. Money is on the move, with investors switching to small and mid-capitalization companies that are prospering from explosive sales and earnings growth. Furthermore, with $8.8 trillion in cash on the sidelines (according to The Wall Street Journal article January 18, 2024), there is plenty of money available to fuel explosive rallies at various times throughout the year.
The Wall Street Journal last week had an article about the Magnificent Seven stocks, identifying Nvidia as the unquestionable leader, although Meta Platforms (META) soared in the wake of its fourth-quarter results. However, WSJ showed a chart that illustrated that META has peaked and contracted a bit, while NVDA is still appreciating. (Nvidia typically announces its fourth-quarter results in late February.)
Of course, the market constantly “climbs a wall of worry,” and the media continue to give us plenty to worry about, led by wars, politics and Fed policy.
