S&P 500 Slips 0.31% to 7,552.13 at Open as Earnings Season Looms
The S&P 500 slipped 0.31% to 7,552.13 after market open, remaining close to its record high of 7,620 and up nearly 20% from its year-to-date low of 6,312. Analysts warn of stretched valuations, with the CAPE ratio at 42, while FactSet data points to expected earnings growth of 23.6% for the second quarter. Major earnings reports from JPMorgan, Goldman Sachs, Morgan Stanley, and top technology firms are due in the coming weeks.
*this image is generated using AI for illustrative purposes only.
The S&P 500 Index edged lower after market open, falling 23.26 points, or 0.31%, to 7,552.13, pulling back slightly from the record high of 7,620. Despite the modest dip, the index remains well above its year-to-date low of 6,312, having surged nearly 20% from that trough as investor focus shifts to the upcoming earnings season.
Analysts Warn of Earnings Bubble
Analysts anticipate earnings growth continued in the second quarter. A FactSet report shows that analysts expect earnings growth of 23.6%. In most cases, companies report results that exceed these expectations, helped by the technology and banking sectors. Still, some analysts are warning about a bubble happening in the stock market, with data showing that stock market valuations are nearing the highs of the dot-com bubble.
In a recent note, an analyst warned that if valuations normalize and earnings decline at the same time, the losses for investors could compound rapidly. One of the most common valuation multiples is the cyclically adjusted price-to-earnings ratio (CAPE), which soared to 42, its highest level since 2000, and much higher than the 2009 low of 14. Goldman Sachs has also warned that there is a risk that investors may be overestimating how long above-average profits will last, especially for companies supplying AI infrastructure.
Upcoming Earnings Reports
Next week will be important as big banks will publish their earnings reports. This includes top companies like JPMorgan, Goldman Sachs, and Morgan Stanley. After that, top US technology companies like Meta Platforms, Amazon, and Microsoft will release their earnings. Companies that have released their earnings so far have sent early signals on what to expect — Micron reported that its revenue jumped by 300% in its third quarter, while Delta Air Lines and PepsiCo also published strong earnings.
Key Market Metrics
The table below summarises the latest market data and key indicators for the S&P 500.
| Metric: | Value: |
|---|---|
| Current Index Level: | 7,552.13 |
| Change at Open: | -23.26 points (-0.31%) |
| All-Time High: | 7,620 |
| Year-to-Date Low: | 6,312 |
| Expected Earnings Growth: | 23.6% |
| CAPE Ratio: | 42 |
Technical Analysis
The daily chart shows that the S&P 500 Index has climbed significantly in recent months, moving from a low of 6,312 to its current level. It has formed a bullish pennant pattern, comprising a vertical line and a symmetrical triangle, and has jumped above the upper side of the triangle pattern. The index has also climbed above the 50-day Exponential Moving Average (EMA) and the Ichimoku Cloud, signaling that bulls remain in control.
How might the upcoming earnings reports from major banks and tech giants influence investor sentiment regarding the current high valuations?
What specific indicators could suggest that the AI infrastructure sector is experiencing a bubble similar to the dot-com era?
If the CAPE ratio continues to rise, what potential market corrections or adjustments could investors anticipate in the near term?
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