It is a bullish signal that the market is rallying without the likes of Apple and Tesla, some investors say
4 min
The Magnificent Seven trade is beginning to fizzle—and yet, the stock market is still heading higher.
The S&P 500 climbed 10% in the first quarter, its best start to a year since 2019 , even though two of its biggest constituents suffered double-digit declines. Apple shares fell 11% in the first three months of the year, while Tesla dropped almost 30%. Alphabet shares sputtered for much of the period before making a run in the past three weeks and ending up 8%.
The other four big tech stocks in the group known as the Magnificent Seven— Nvidia , Meta Platforms , Microsoft , Amazon.com —continued their meteoric run and outpaced the broader market. Some market strategists have dubbed them the new Fab Four.
Some investors say it is a bullish signal that the market is still rallying without the likes of Apple and Tesla because it means other groups are taking part . All of the S&P 500’s sectors, except real estate, logged gains in the first quarter. Small caps, industrial and financial-services stocks are among those that jumped, fueling bets that the broader market might have more room to run.
Much of the enthusiasm is tied to hopes that the economy has escaped a deep recession and that the Federal Reserve will soon pivot to cutting interest rates , even if not at the pace some investors had previously hoped. A frenzy over the future of artificial intelligence has added to the zeal.
“If you’d have told me eight weeks ago that Apple and Tesla would be down as much as they are, oh and by the way, you’re punting when you’re going to do the rate cuts and you’re getting less rate cuts, I would have assumed the market would be down,” said Ryan Detrick , chief market strategist at Carson Group.
To be sure, some investors worry the divergence in the big tech stocks is a sign of exhaustion in the rally and question whether future gains will be harder to achieve from here. The S&P 500’s market value has swelled more than $9 trillion since late October, and the index has set 22 record closes in 2024.
In the coming days, investors trying to gauge the trajectory of the market and economy will parse the release of U.S. manufacturing data Monday and the monthly jobs report Friday.
Nvidia continues to be a stock-market star. The graphics-chip maker has indicated demand for the computing power that underlies AI remains astronomical . Its shares have jumped more than 80% to start the year, after more than tripling in 2023.
By some metrics, Nvidia has displaced Tesla as the most popular stock among individual investors . It is currently the biggest average holding in individual investors’ portfolios, at about 9%, VandaTrack data show.
Meta shares, meanwhile, have soared partly thanks to Meta’s investments in artificial intelligence that have made targeted ads smarter. The social-media company recently said it would pay its first shareholder dividend. Microsoft stole the crown of biggest U.S. company from Apple earlier this year, with a valuation that topped $3 trillion, and Amazon has sharply improved its profitability.
Despite their recent gains, some of the stocks look less pricey than they did last year. Nvidia is trading at 35 times its projected earnings over the next 12 months, below its peak of 62 in May of last year. Amazon’s multiple is 40, down from 2023’s high of 62. The S&P 500 is trading at 21 times future earnings, slightly up from last year’s highs of 19.
The Fab Four are responsible for nearly half of the S&P 500’s first-quarter advance, according to Howard Silverblatt , senior index analyst at S&P Dow Jones Indices.
Joseph Ferrara , investment strategist at Gateway Investment Advisers, said he expects investors to rotate out of big tech stocks and funnel into other sectors as the year progresses. That is largely because the earnings of the other 493 companies in the index are expected to outperform those of the Magnificent Seven by the fourth quarter.
“The fact that the market is still holding these levels and trading up without that full force of the Magnificent Seven is actually a really positive thing,” he said.
Jonathan Golub , a strategist at UBS, said one reason Magnificent Seven’s earnings dominance could end is because it will be hard to top the explosive growth they posted at the end of last year. Those results looked like blockbuster beats when compared with 2022’s weaker numbers, he said in a recent research note.
Last year, any hint of weakness in the Magnificent Seven would have sent the broader market tumbling. In fact, for much of the year, those seven stocks were responsible for all of the S&P 500’s advance.
This year is a different story. Tesla is struggling on numerous fronts . The electric-vehicle maker is facing pressure from Chinese competitors, which have rapidly expanded their presence around the globe in recent years. It has also warned of notably slower growth in 2024, and its profit margins have taken a hit.
Apple’s woes have been mounting, too . The Justice Department recently sued the company, accusing it of monopolistic behaviour. European authorities are cracking down on its app store. Plus, it is facing another weak iPhone demand cycle, and investors are worried that Apple is behind in the current wave of excitement around AI.
Bespoke Investment Group data show Apple shares underperformed the S&P 500 over the 200 days through Tuesday by the widest margin since October 2013.
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Investors are bracing for a bumpier fall stock market due to shifting odds of a Federal Reserve interest-rate increase and other macro challenges.
3 min
The stock market had a decent summer. Investors are bracing for a bumpier fall.
In the past couple of months, equity investors cheered soaring profits at big companies, shrugged off jitters in the bond market and nudged megacap tech shares back near records.
Now, as the post-Labor Day stretch begins, a number of new challenges lie ahead: ever-shifting odds of an interest-rate increase from the Federal Reserve. Sky-high expectations after a stunning earnings season. The persistent threat of higher consumer prices as fighting in the Middle East drags on.
“You’re moving from this earnings-driven market to this macro-driven market with the Fed, inflation and interest rates in focus,” said Keith Lerner, chief investment adviser for Truist Advisory Services. “It tends to be a choppier period.”
Historically, every major U.S. stock index experiences its worst average return in September. The Dow Jones Industrial Average has slid an average 1.1% in the ninth month of the year, in data that dates back to the 19th century. The S&P 500 has seen the same average decline—and for every September dating back to 1928, the benchmark ends the month lower more than half of the time.
Analysts caution against reading too much into those seasonal patterns. But in recent weeks, new reasons for investor caution have emerged. One of the largest: the looming threat of an interest-rate increase from the Fed, which announces its next policy decision on Sept. 16.
Chairman Kevin Warsh’s decision to ditch forward guidance and take more of his cues from markets has muddied the waters for investors when it comes to monetary policy. That has left traders scouring Fed governor speeches and economic-data reports for clues on the central bank’s next move.
“There’s going to be a lot of eyes on those numbers,” said John Luke Tyner, head of fixed income and portfolio manager at Aptus Capital Advisors.
The past couple of weeks offered just one example of how frequently those expectations can change. After Warsh struck a hawkish tone during remarks on Aug. 28, the odds of a hike at the Fed’s next meeting jumped from 35% before the speech to 58%, according to CME FedWatch data.
On Thursday, Fed governor Christopher Waller made a case for leaving rates where they are. Interest-rate futures showed coin-flip odds between a hike and a hold. Then Friday’s robust jobs report amped up rate-hike bets once more, back to a roughly 60% chance of higher rates after the meeting.
“Rates have really been driving the car for equities the last few weeks,” said Ross Mayfield, an investment strategist at Baird.
That uncertainty comes as an unruly bond market could put pressure on stocks. Treasury yields have marched higher for much of the summer, driven by concerns about rising oil prices, growing U.S. budget deficits and a deluge of tech-company bonds now competing for investors’ cash. Last week, the rout went global, pushing yields to multiyear highs in Japan, Germany and the U.K.
Higher bond yields can drag on stock prices and lift borrowing costs for companies and consumers across the economy.
Rising prices remain the top concern for bond traders, and continued fighting between the U.S. and Iran has done little to ease those worries. The national average price of diesel climbed to a record of $5.850 on Friday, according to AAA. That is up from $3.712 a year ago.
Investors will get more insight on the path of prices this week, with the much-awaited consumer-price index report due Friday and a reading on producer prices Thursday.
With another blockbuster earnings season in the books, some analysts have also warned that any boost from the third-quarter reports due in the coming months could be minimal. Back-to-back quarters of standout profits have raised expectations and made it especially difficult to impress traders. Custom-chip company Broadcom, for example, said Wednesday that it more than tripled its earnings and nearly doubled its revenue. Shares slipped 2.7% the next session.
Many analysts note there are plenty of reasons not to panic. The economy is in impressive shape, thanks to a healthy labor market and the rippling effects of the artificial-intelligence investment boom. Profits are booming at America’s biggest companies. The Cboe Volatility Index has dropped to its lowest levels of 2026. Credit spreads are tight, a sign bond investors aren’t concerned about economic conditions that could hurt companies.
But the mood has shifted from the euphoria that felt tangible when the Nasdaq was notching back-to-back records early this summer. The question, Mayfield said, is whether the fundamentals that have bolstered the bull market so far can stretch the rally into 2027.
“There are more anxieties or uncertainties about the backdrop,” he said. “It does feel like a transitional moment.”
