S&P 500 Pullback Delayed? LPL on Earnings Season Impact

The S&P 500 closed at a record high on Tuesday, buoyed by optimism about the upcoming earnings season. According to LPL Financial, the season should be “solid,” but expecting growth estimates to rise for the second half of 2024 might be “a lot to ask.”

Jeff Buchbinder, chief equity strategist at LPL Financial, stated that a “crack in the [artificial-intelligence] story” is unlikely in second-quarter results. He suggested that positive earnings news could delay the anticipated pullback.

Buchbinder’s research indicates Big Tech will significantly contribute to S&P 500 earnings growth in Q2, with additional contributions from sectors like healthcare, financials, energy, and utilities.

S&P 500

The earnings season will kick off with reports from major Wall Street banks, including JPMorgan Chase, Citigroup, and Wells Fargo, on July 12. Analysts project a 9.2% year-over-year increase in S&P 500 earnings per share (EPS) growth for Q2, with Buchbinder expecting EPS growth to reach double digits for the first time since Q4 2021.

The S&P 500 is already up in July after a 14.5% rally in the first half of 2024. Buchbinder emphasized that earnings growth is crucial for maintaining or building on these gains, warning that a pullback is overdue. He advised investors to be patient, suggesting that the next six weeks of earnings may not provide a buying opportunity.

Within Big Tech, Buchbinder highlighted the “Super Six” — Alphabet, Amazon, Meta, Microsoft, Nvidia, and Apple — as key drivers of S&P 500 earnings growth in Q2. He anticipates that the broadening of earnings growth will be a prolonged process extending into 2025, with Big Tech remaining influential.

Buchbinder also noted the importance of company guidance during the earnings season to gauge potential earnings growth in the latter half of 2024. He expects executives to maintain their outlooks, driven by a steady economy and continued AI investments.

On Tuesday, the Dow Jones Industrial Average rose by 0.4%, the S&P 500 by 0.6%, and the Nasdaq Composite by 0.8%. The S&P 500 closed at a record 5,509.01, according to Dow Jones Market Data. Buchbinder predicts a market dip might not occur until August, post-earnings season.

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