On Wednesday, Barclays strategists stated in a note that the S&P 500 is still hinged on stocks in the technology sector to drive its growth in the 4Q24 earnings season.
January’s performance is often used as an indicator of the trajectory for large-cap US equities for the rest of the year. According to Barclay’s finding, a slump in the first month hinted at a median return of +2.5% for the later 11 months, while at least an 11% gain usually denotes a median return of +11.4% for the rest of the year.
Venu Krishna, leader of the strategists, remarked that the downward revisions for sectors besides technology are 300 basis points above average, signifying a lackluster sentiment for the first quarter of the new year.
However, the consensus forecast pointed out that most non-technology sectors could see 4Q24 earnings per share (EPS) growth fall short of long-term medians, lowering expectations for the upcoming quarterly reports.
Strategists warned that while non-tech companies’ year-on-year EPS growth for the S&P 500 expected a substantial improvement in 1Q25, the last quarter failed to meet a similar forecast as a result of the negative operating leverage and subsequent negative revision.
EPS consensus estimate for FY25 has dipped around one dollar since the report. The forecast currently sits at $274 from the previous $271.
The bank noted that negative revisions are concentrated in the first half of 2025 so far.
Major tech companies are expected to continue pushing EPS growth far above long-term median levels despite some hiccups in price for 1H25.
