Tech megacaps to lead earnings season, UBS says
Nasdaq advances ~0.8%, S&P 500 modestly higher, Dow turns red
Comm Svcs leads S&P 500 sector gainers; Energy weakest group
Euro STOXX 600 ends down 0.2%
Dollar dips; bitcoin falls >3%; crude up; gold gains >1%
U.S. 10-Year Treasury yield slides to ~4.28%
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TECH MEGACAPS TO LEAD EARNINGS SEASON, UBS SAYS
The S&P 500 Information Technology sector .SPLRCT soared to another fresh all time high on Friday, bringing its 2024 gains to over 33%.
With the next earnings season kicking off on July 12, UBS equity analysts expect the sector's earnings to continue leading the S&P 500.
The broker expects S&P 500 earnings per share (EPS) to grow 7.8%, with EPS for the tech sector predicted to rise 23.3%.
In fact, excluding technology stocks, UBS forecasts S&P 500 EPS growth of just 2.5%, highlighting the inequality between tech sector gains and the rest of the market.
Technology shares have been riding the artificial intelligence investment wave, and look set to continue their recent rally, but it remains to be seen whether gains can be sustained.
According to UBS, EPS for the six big tech giants combined is expected to grow by 31.7% in the second quarter, while earnings for other tech firms will grow just 9.5%, UBS says.
Non-tech companies will have a mere 2.5% EPS growth in the same quarter, UBS forecasts, pointing to continued disparity between tech stocks and the rest of the market.
Chipmaker Nvidia NVDA.O is projected to top the earnings growth chart, outpacing its rivals with 134% gains. Similarly, chipmaker, Micron Technology MU.O, is seen posting over 135% EPS growth.
UBS says the outlook for materials, however, is more grim, with UBS forecasting earnings for the sector to fall 8.9%. The world's largest lithium producer Albemarle's ALB.N earnings per share are forecast to slump 91.6% in the second quarter.
Analysts at Commonwealth Financial Network point to the risks associated with projected higher valuations of tech companies, though they forcast double digit price growth in the S&P 500 for the second half of 2024 in their mid-year outlook.
"For the (S&P 500's) climb to extend into 2025, smaller-cap and international stocks will need to help carry the load."
(Nikhil Sharma)
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THE RISE OF THE MODERATES, EYES ON FRANCE - CLICK HERE
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(Terence Gabriel is a Reuters market analyst. The views expressed are his own)
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