Rest of S&P 500 seen outpacing Mag 7 on Q3 earnings growth - Jefferies

What happened

Jefferies expects the rest of the S&P 500 to beat the Magnificent Seven on third-quarter earnings growth. Adjusted earnings for the rest of the index are seen rising 32% versus 21.4% for the Mag 7, though the Mag 7 still leads on revenue.

Confirmed

Global impact / market context

Broader profit growth means more companies, not just a few big technology names, are adding earnings. That can spread stock market gains across more sectors and reduce reliance on a small group of large companies whose shares have led the market.

Analyst inference

Third-quarter earnings are on pace to rise more than 30% from a year ago, according to LSEG I/B/E/S data. That profit strength has supported the stock market despite rising Treasury yields, which are returns on US government debt, and higher energy costs tied to Middle East tensions.

Analyst inference

What to watch

1. Alphabet, Microsoft and Amazon report this week. Investors will focus on their guidance on capital spending plans, which means how much they intend to spend on long-term assets, and whether they see returns on those outlays. Confirmed
2. Watch whether the expected 32% earnings growth for the rest of the S&P 500 actually appears as more companies report, since that broadening would support the idea that profit momentum extends beyond mega-cap technology. Analyst inference
3. Track how investors position across sectors if earnings growth spreads beyond the Magnificent Seven, because money moving into a wider set of stocks could change which parts of the market lead or lag. Analyst inference

Evidence

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