The year 2024 is shaping up to be a record year for Wall Street. On Wednesday, the American flagship index, the S&P 500, once again broke the all-time record while surpassing the 5,400 point mark and completing an increase of almost 14% since the beginning of the year.
This rally gets a boost in the last few weeks from the American report season that reveals the performance of companies traded in the world’s largest economy in the first quarter of 2024. The playing field for these companies is challenging. The interest rate is high and burdens the credit market, the geopolitical tensions and the wars in Israel and Ukraine exacerbate the uncertainty, and the fear of inflation has not yet been removed.
In fact, the fear of these difficult field conditions led to sharp declines in April, on the eve of the reporting season. But then Wall Street’s financial data began to flow in, revealing the resilience of the American market and the S&P 500 has rebounded by 9% since then. A new report from the analysis and data analysis company FactSet analyzed the results of the companies in the S&P 500 index that reported their results for the first quarter of 2024.
How many companies exceeded the analysts’ forecasts and how many missed? Which sector surprised in profitability? And is the pricing of the American flag index too expensive? Globes dived into the data.
Most companies beat analysts’ forecasts
The current reporting season was called the “test of the rally” in the market. According to the data so far – Wall Street has successfully passed the test. 79% of the companies in the S&P 500 exceeded the analysts’ forecasts for the profit line. These figures are higher than the average for the last 10 years, which was 74%.
The rate of earnings growth is at a two-year high
The rate of earnings growth in the last quarter (5.9%) is the highest since the first quarter of 2022 – the eve of the interest rate hikes. Among the sectors that stood out for the better: communication services, which includes stocks such as Meta, Google and Netflix. and technology, which includes giants such as Nvidia, Microsoft and Apple.
According to the analysts, the market is flooded with opportunities
If you ask the analysts, the market seems to be flooded with opportunities. Of the 1,713 analyst recommendations collected in the report, no less than 55% are buy recommendations. According to FactSet, if the recommendations are summed up, the S&P 500 index may reach 5,900 points in a year (an increase of 9%).
Does the S&P 500’s Pricing Justify the Earnings?
Historically, the US stock market is still expensive. The profit multiplier stands at 20.7, higher than the average in the last 5 years (19.2)
The fear of recession – at the lowest level since 2021
Only 29 companies mentioned the fear of a slowdown in the American economy. And they usually tend to expect a recession only after it has already occurred. This is what happened with the outbreak of the corona virus, (after the reports of the first quarter of the year) and also two years ago, when the concerns came long after the interest rate increases.
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