The Market Catches its Breadth
By John Persinos
Some analysts have expressed concerns that the stock market rally is disproportionately driven by the technology sector, and while that's true, investors can take comfort in the market's increasing breadth.
More about the market's breadth in a minute. First, let's look at the latest conditions underpinning the rally and why it's not simply a function of FOMO (fear of missing out).
Examining the fourth quarter of 2023, with 97% of S&P 500 companies delivering actual results, 73% of these companies have surprised with positive earnings per share (EPS) outcomes, while 64% have surpassed expectations with positive revenue results. These figures come courtesy of research firm FactSet.
For the Q4 earnings season, the S&P 500 has experienced a blended year-over-year earnings growth rate of 4.0%. "Blended" combines actual results with those that are projected. Should this figure hold, it would signify the index's second consecutive quarter of earnings expansion.
Strong earnings performance has been a major pillar of the stock market rally. The major indices have been hitting record highs and they posted gains for the month of February.
In February, the tech-heavy NASDAQ led the pack with a 6.12% gain. The S&P 500 climbed 5.17%, while the Dow Jones Industrial Average added 2.22%. All S&P 500 subsectors finished the month in positive territory. The small-cap Russell 2000 gained 5.3%, presaging what's expected to be a strong run for the small fry this year.
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