Market Recap: S&P 500 Hits New High as Magnificent Seven Earnings Loom
Market Performance
On Friday, January 24, 2025, the U.S. stock market closed with mixed results, as investors eagerly anticipate next week’s earnings reports from the “Magnificent Seven” tech giants. The S&P 500 (^GSPC) reached a new record high, continuing its strong performance since the beginning of the year. The index has seen impressive gains, marking the best start for a U.S. president since 1985.
The Dow Jones Industrial Average (^DJI) and Nasdaq Composite (^IXIC) showed slight declines in Friday’s trading session. The Nasdaq 100, heavily influenced by tech stocks, hovered near its annual and historical highs between 20,500 and 20,761 points. Trading volumes have stabilized at relatively low levels, indicating a cautious market sentiment ahead of crucial earnings releases.
Upcoming Market Events
The coming week is poised to be pivotal for the stock market, with several high-impact events on the horizon:
1. Magnificent Seven Earnings: Five of the seven mega-cap tech companies are set to report their earnings next week. Tesla (TSLA), Microsoft (MSFT), and Meta Platforms (META) will release their results on January 29, followed by Apple (AAPL) and Amazon (AMZN) on January 30.
2. Federal Reserve Meeting: The Fed’s upcoming meeting will be closely watched for any signals regarding future interest rate policies.
3. Economic Data Releases: Key economic indicators, including U.S. GDP and PCE (Personal Consumption Expenditures) data, are scheduled for release, potentially influencing market direction.
Major Stock News
Tesla (TSLA): Despite recent volatility, Tesla has outperformed other Magnificent Seven stocks over the past six months. The company boasts the highest one-year earnings growth forecast among the group, excluding Nvidia. However, its stock has faced challenges in the past month, while competitors like Meta, Amazon, and Alphabet have been reaching new highs.
Nvidia (NVDA): As the world’s largest company by market capitalization, approaching $3.5 trillion, Nvidia continues to lead the AI revolution. The company’s earnings report, scheduled for February 26, is highly anticipated and could rival the impact of major economic data releases.
Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL), Amazon (AMZN), and Meta Platforms (META): These tech giants, along with Tesla and Nvidia, now account for approximately 33% of the S&P 500 and 44.5% of the Nasdaq 100. Their combined market capitalization of $17.75 trillion equates to about 60% of U.S. GDP, underscoring their significant influence on market movements.
Market Outlook
The overall market trend remains bullish, favoring potential upside breakouts. However, investors should remain cautious due to several factors:
1. Valuation Concerns: The Magnificent Seven have a high capitalization-weighted price/earnings (P/E) ratio of 41x, nearly double the S&P 500’s 21x P/E ratio when excluding these companies.
2. Growth Expectations: Consensus estimates project the Magnificent Seven to see market-cap-weighted earnings grow by 28% and sales by 21.7% in Q4 2024, significantly outpacing the broader S&P 500.
3. Political Landscape: The alignment of some tech CEOs with the current administration may influence market dynamics and individual stock performances.
As we move further into 2025, the stock market’s direction will likely be heavily influenced by the performance and guidance provided by these tech behemoths. Investors should closely monitor earnings reports, economic data releases, and Federal Reserve communications to navigate the potentially volatile market conditions ahead.
