Earnings in the benchmark S&P 500 are growing faster than anticipated and could support a persistent rise in the index, according to analysts at Yardeni Research.
In a note to clients, the strategists flagged that the forward earnings outlook for S&P 500 companies -- which average together industry observers’ projections for the current and upcoming years -- is currently converging toward the 2026 figure, which stood at $304.12 during the week of September 4.
Multiplying that number by the current forward price-to-earnings ratio of the S&P 500 of around 22.0, the index is seen ending the year at 6600, they added.
Although the analysts noted that such sudden and ongoing climbs in the S&P 500 are "typically followed" by wider meltdowns, such a downturn may not occur if the rise has "fundamental support from strong earnings."
"The bull market in stocks that began after the pandemic lockdowns has been primarily driven by earnings," the analysts wrote.
"We’ve been bullish on the economy, earnings, and the stock market since the March 23, 2020 bottom in the S&P 500. We’ve been bullish again on all three this year. However, earnings are growing even faster than we expected."
The S&P 500 futures contract pointed slightly higher on Tuesday, as investors geared up for the release of a preliminary nonfarm payrolls benchmark estimate and looked ahead to key inflation data later this week.
On Monday, the main averages on Wall Street rose in the prior session, with the S&P 500 finishing at 6495.15. Underpinning sentiment were expectations that the Federal Reserve will soon cut interest rates in a bid to help support a potentially slowing U.S. labor market.
In individual stocks, shares in retail trading app Robinhood and software publishers group AppLovin both increased on plans for the stocks to be included on the S&P 500. Chipmaker Broadcom also gained 3.2%, its latest jump since the firm said it anticipates solid artificial intelligence-fueled revenue growth.
Source :
https://www.investing.com/news/stock-market-news/sp-500-earnings-growing-faster-than-anticipated--yardeni-research-4230826
