Brian Gilmartin | Jan 29, 2024 01:47AM ET
Earlier last week, the LSEG put up their quarterly earnings preview, and included within was the “market cap weight vs sector weight” analysis of the 11 S&P 500 sectors.
Tajinder Dhillon, the LSEG executive who’s responsible for prepping and publishing the Russell 2000 and S&P 500 earnings reports each week, sent the earnings weights of the top 10 names in the S&P 500 last week, so those earnings weights could be compared to their respective market cap weights:
5 of the top 10 S&P 500 mega-cap names report this week.
Apple, Meta, and Amazon report after the closing bell on February 1 ’24, while Microsoft and Alphabet (GOOG/GOOGL) report after the closing bell on Tuesday, January 30, ’24.
The whole point of this is to give readers the perspective of how the two “weights” relate.
Back in the late 1990s, the argument against the technology sector in the S&P 500, i.e. Intel (NASDAQ:INTC), Microsoft, Cisco (NASDAQ:CSCO), SunMicro, etc. was that with a 35% market cap weight of 35%, the earnings weight of the technology sector was just 13% – 14%.
A bullish or bearish argument isn’t being bad based solely on this ratio, but readers can tell the ratio is far more “reasonable” today. Of the 5 names listed above, Apple’s earnings weight is larger than its market cap weight, (which is truly surprising) while (also surprising), the same can be said for META. Only Amazon’s market cap is more than 2x greater than its earnings weight today. (The market cap weight is sourced from Morningstar and final market prices for the SPY portfolio as of 1/25/24.)
It’s normal for the financial sector to have an earnings weight greater than its market cap, and that’s true for Berkshire Hathaway (NYSE:BRKa). JP Morgan is actually ranked 12th in the SPY by market cap, but 7th by earnings weight.
This blog will be out with an earnings preview on a number of the above names this weekend.
h2 S&P 500 Data:/h2Earnings weight matters to the S&P 500, and this coming week. 18.3% of the S&P 500’s (only 5 stocks) earnings weight reports in just three days – Tuesday through Thursday. Again, earnings previews for some of the top 10 names will be out this weekend on this blog.
The increase in the S&P 500’s upside surprise this week, is a good tell, but guidance matters more. It is understandable that management's are being cautious – just look at how many of Wall Street’s best have called for a recession the last 24 months.
IBES data and Refinitiv, have undergone a corporate name change with the start of 2024, hence – although the data will be from the exact same source – the new name for Refinitiv, will be known as LSEG (London Stock Exchange Group) – and will be referred to as LSEG going forward.
***
None of this is advice or a recommendation. Past performance is no guarantee or suggestion of future results. All S&P 500 earnings data is sourced from LSEG unless otherwise noted. Capital markets can change quickly for both the good and the bad. Readers should gauge their comfort with their portfolio volatility accordingly, and adjust when necessary.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.