Big Tech earnings put the Magnificent Seven back in the hot seat
The megacap tech group has rebounded in July, and analysts say its earnings could decide whether the S&P 500 gets moving again.
By Sal Moretti · Money Reporter
3 min read
The S&P 500 has been stuck in summer traffic, and Wall Street is once again looking at seven familiar names to clear the road.
MarketWatch reported that the so-called Magnificent Seven, Nvidia, Apple, Alphabet, Meta Platforms, Microsoft, Amazon and Tesla, have started to recover after a rough June. The Roundhill Magnificent Seven ETF, which tracks the group, has gained more than 4% so far in July after dropping 9% in June, its second-worst month on record.
Apple and Meta have done much of the heavy lifting. FactSet data cited by MarketWatch showed Apple up about 15% this month, a move that helped it regain the title of the world’s most valuable company on Friday. Meta has risen 14.7% in July.
A rotation under the hood
The broader market has not gone anywhere fast. MarketWatch reported that the S&P 500 was mostly unchanged from a month earlier as strength in megacap tech offset a hard pullback in semiconductor and memory-chip shares.
Steve Sosnick, chief strategist at Interactive Brokers, told MarketWatch that investors were shifting back toward companies using artificial intelligence rather than those making the hardware behind it.
“Now, investors are rotating back to AI takers from makers,” Sosnick said, comparing the move to passengers on a tour boat shifting from one side to the other.
The stakes are large because the Magnificent Seven make up more than 30% of the S&P 500’s total market value. Dow Jones Market Data said the index has gone more than six weeks without a record close, its longest such stretch since April.
Sosnick told MarketWatch that a rally becomes difficult when the biggest names in a top-heavy index are lagging. He said companies at the top need to at least keep pace for the market to move higher for long.
Earnings take center stage
John Campbell, senior portfolio manager at Allspring Global Investments, told MarketWatch that investors have been drawn back to the group because of “safety in earnings.” He said quarterly results from Big Tech this week could provide the push the S&P 500 has lacked.
Technology earnings season begins Wednesday, with Alphabet and Tesla scheduled to report after the closing bell, according to MarketWatch.
John Butters, senior earnings analyst at FactSet Research Systems, said the Magnificent Seven are expected to post 31.1% annual earnings growth for the second quarter. That compares with 22.8% for the rest of the S&P 500.
The growth story is not confined to the seven. Butters said four of the five S&P 500 companies with the strongest forecast earnings growth, Micron Technology, Chevron, Exxon Mobil and Broadcom, are outside the Magnificent Seven.
MarketWatch reported that earnings could also split the AI trade further, rewarding companies already making money from AI-related spending and pressuring those still relying on future promises.
Oil and the Fed add the wild cards
Big Tech is not the only force that could shake the market this week. MarketWatch reported that tensions in the Middle East remain a risk, especially if oil prices jump again.
Last week, President Donald Trump reinstated a blockade on Iranian shipping through the Strait of Hormuz, sending global oil prices back above $87 a barrel, according to FactSet data cited by MarketWatch.
Campbell told MarketWatch he was concerned about complacency in stocks around geopolitical risks and the economic impact of another oil spike. Those risks arrive ahead of the Federal Reserve’s July 28 and 29 policy meeting.
U.S. stocks ended Friday lower for the week. FactSet data showed the S&P 500 down 1.6%, the Dow off 0.9% and the Nasdaq Composite down 2.9%.
This story draws on original reporting from MarketWatch.