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Tag: Advertising/Marketing/Public Relations

  • Big Tech earnings have been strong, but Apple is about to answer the thousand-dollar question

    Big Tech earnings have been strong, but Apple is about to answer the thousand-dollar question

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    While the stock market reactions may not prove it, Big Tech is four-for-four so far this earnings reporting season.

    Alphabet Inc.
    GOOG,
    -0.03%

    GOOGL,
    -0.09%    ,
    Amazon.com Inc.
    AMZN,
    +6.83%    ,
    Meta Platforms Inc.
    META,
    +2.91%
    and Microsoft Corp.
    MSFT,
    +0.59%
    all beat earnings and revenue expectations for the latest quarter, showing, among other things that the advertising market was healthy in the latest quarter and that software spending is holding up.

    But one more major test looms in the week ahead. Apple Inc.
    AAPL,
    +0.80%
    is due to deliver September-quarter results on Thursday and those earnings will answer a key question: Are consumers still so willing to purchase thousand-dollar iPhones in the current economy?

    Results from other companies in recent weeks have painted a mixed picture of consumer spending. Visa Inc.
    V,
    -0.87%    ,
    Mastercard Inc.
    MA,
    -0.14%
    and American Express Co.
    AXP,
    -1.42%
    say that spending remains resilient, but there are also signs that cracks are starting to form in categories deemed non-essential. Just look at Align Technology Inc.
    ALGN,
    +0.20%    ,
    the maker of Invisalign orthodontic aligners, which saw its stock plunge last week after noting that people seem to be putting off dental and orthodontic visits.

    Read: Invisalign maker’s stock craters after soft earnings, but analysts still say it’s a buy

    Granted, some might say that iPhones are glorified necessities these days for Apple fans, even with their high price tags. But Apple conducted an effective price increase on its iPhone 15 Pro model when it rolled out its new phones in September, all while delivering a mostly incremental suite of feature upgrades across all its latest models. Will the new phones prove enticing enough in a period of stretched budgets?

    Just judging by S&P 500
    SPX
    results so far in the aggregate, the odds would seem to be in Apple’s favor for a beat this quarter. About half of index components have already reported, and 78% have posted earnings upside, while 62% have surprised positively on the top line, according to FactSet.

    Revenue will be the key item for Apple, as consensus expectations call for a small decline on the metric, which would mark the fourth consecutive year-over-year drop. It’s also worth noting that companies on the whole haven’t been topping revenue estimates by their usual margin. S&P 500 components in aggregate have reported revenue 0.8% above expectations, which compares with a five-year average of 2.0%, FactSet Senior Earnings Analyst John Butters wrote in a recent report.

    Apple’s report could also highlight the impact of currency on corporate results, as the company generates more than half of its revenue internationally.

    “Given the stronger U.S. dollar in recent months, are S&P 500 companies with more international revenue exposure reporting lower (year-over-year) earnings and revenues for Q3 compared to S&P 500 companies with more domestic revenue exposure?” Butters asked. “The answer is yes.”

    This week in earnings

    Many U.S. investors in financial-technology companies likely hadn’t heard of European payments player Worldline SA
    WLN,
    +9.06%
    before last week, but a warning from the French company about deteriorating conditions in Europe helped send shares of PayPal Holdings Inc.
    PYPL,
    -2.63%
    and Block Inc.
    SQ,
    -3.98%
    sharply lower Wednesday, in a selloff one analyst deemed an overreaction. Those companies will look to reassure Wall Street about the health of their businesses with their own reports this week. Plus, while not a payments name, SoFi Technologies Inc.
    SOFI,
    -0.43%
    will provide another read on the fintech sector. Investors will be watching to see how the end of the student-loan moratorium impacted student lending volumes.

    The week ahead will also shed light on how consumers’ dining preferences have evolved in the current economy. Starbucks Corp.
    SBUX,
    -0.70%    ,
    Dine Brands Global Inc.
    DIN,
    -0.12%    ,
    Cheesecake Factory Inc.
    CAKE,
    -0.47%
    and Sweetgreen Inc.
    SG,
    +0.59%
    are among names on the docket. Plus, amid concerns about the impact of GLP-1 drugs such as Ozempic and Wegovy on eating habits, Kraft Heinz Co.’s management will be in the spotlight.

    Don’t miss: What exactly are patients taking new weight-loss drugs eating and what are they avoiding? Bernstein asked them.

    The call to put on your calendar

    You can’t spell Advanced Micro Devices without AI (sort of): Nvidia Corp.
    NVDA,
    +0.43%
    has been ruling the chip world this year thanks to its dominance with the sort of hardware needed to power the corporate AI fervor. Investors will be watching Tuesday afternoon to see how quickly Advanced Micro Devices Inc.’s
    AMD,
    +2.95%
    own AI story is coming together. “The AMD narrative feels all about their data center (and, particularly, their AI story) right now,” Bernstein analyst Stacy Rasgon wrote in a note to clients. “In the near term the achievability of their 2H data-center growth (guided to 50% half-over-half) will be the question.” Rasgon expects AMD to discuss recent customer wins for its MI300X chip, though he thinks it will take time for the company to see “real volume.”

    The number to watch

    PayPal transaction margins: Shares of the one-time investor darling are trading at their lowest levels since May 2017, and the latest source of anguish for Wall Street is the company’s transaction margins. PayPal’s lower-margin unbranded checkout business has been growing more quickly than its higher-margin branded checkout product, a trend that’s been weighing on overall transaction margins. Barclays analyst Ramsey El-Assal expects the third quarter to mark a bottom on the metric before trends stabilize in the fourth quarter. “We do not believe the stock is crowded on the long or short side into earnings, as investors lack conviction regarding the magnitude of transaction margin headwinds in Q3,” he wrote in a recent preview. “In any case, we view Q3 as a potential clearing event.” PayPal posts results Wednesday afternoon.

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  • Meta’s Earnings Story Will Be a Good Ol’ Rebound in Ads

    Meta’s Earnings Story Will Be a Good Ol’ Rebound in Ads

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    Oct 25, 2023, 1:00 am EDT

    In recent quarters, Meta Platforms CEO Mark Zuckerberg has been talking more about artificial intelligence and cost cutting, while focusing less and less on the company’s multibillion-dollar investment in the metaverse. Expect more of the same when the parent of Facebook, Instagram, WhatsApp, and Threads reports results after the close Wednesday. 

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  • AI stole the show this year, but earnings will drag Wall Street back to reality

    AI stole the show this year, but earnings will drag Wall Street back to reality

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    Nearly a year ago, OpenAI released ChatGPT 3 into the world, and investors got visions of dollar signs in their heads as they imagined the ways that artificial intelligence could make big money for businesses.

    Wall Street’s now coming to terms with the fact that those sorts of paydays are going to take time. As investors have already seen from the past two quarters of earnings, AI has only really delivered financial benefits for a select few hardware companies so far — while spurring new costs for many others.

    “The AI boom has already bifurcated into the contenders and pretenders,” said Daniel Newman, chief executive and principal analyst of Futurum Research. And while Advanced Micro Devices Inc., Intel Corp. and Arm Holdings PLC
    ARM,
    +0.38%
    have stirred up interest, Nvidia Corp.
    NVDA,
    -4.68%
    has established itself as far and away the greatest “contender,” with AI driving strong demand for its chips tuned for AI training.

    Nvidia last quarter reported record earnings, including a 141% jump in revenue for its graphics chips used in AI infrastructure building up data centers. Nvidia, which reports near the end of earnings season on Nov. 21, posted record revenue of $13.5 billion last quarter and is expected to easily top that with $16 billion in the most recent quarter, a surge of 170% versus a year ago. Those estimates include $12.3 billion of revenue coming from data-center sales.

    Other chip companies could post gains from AI as well, but to far lesser extents. Candidates include Broadcom Corp.
    AVGO,
    -2.01%
    and system maker Super Micro Computer Inc.
    SMCI,
    +2.35%    ,
    as well as Marvell Technology Inc.
    MRVL,
    -0.91%    ,
    which last quarter told analysts that it expects to end the year at a revenue run rate of about $800 million this year from cloud/data-center chips related to AI.

    “This is well above what we had outlined last quarter. Put this in perspective: This would put us at the run rate we had previously communicated for all of next year,” Marvel Chief Executive Matthew Murphy told analysts.

    Super Micro is also riding the AI wave with its customized data-center servers that are designed to consume less power. But revenue in the September quarter is forecast to rise just 15% from a year ago and drop on a sequential basis, as supply constraints from Nvidia likely hampered Super Micro’s ability to meet all its demand.

    Much as Advanced Micro Devices Inc.
    AMD,
    -1.24%
    and Intel Corp.
    INTC,
    -1.37%
    want to be in the AI conversations with the graphics chips they hope will be used for AI data-center applications, they won’t see much of an impact yet from AI revenue. Plus, those companies are experiencing a slowdown in PC sales that may overshadow any small benefit from AI chips.

    The AI boom in chips is clearly not providing enough of a boost to lift finances for the overall semiconductor sector, which is forecast to see earnings fall 3.3% in the third quarter and post a revenue decline of 0.6%, according to FactSet. The industry is being dragged down in part by Micron Technology Inc.
    MU,
    -0.12%    ,
    which reported a 40% drop in revenue and a whopping fiscal fourth-quarter loss in late September for the quarter ended Aug. 31, which is included in FactSet’s third-quarter data. Even so, the company called a bottom to the memory-chip downturn.

    Read also: Micron’s AI focused chip won’t help financial results anytime soon.

    “Most of the consumer-based tech is still struggling, [including] PCs, laptops and to a certain extent smartphones,” said Daniel Morgan, senior portfolio manager at Synovus Trust Co. Wall Street has tempered expectations related to the impact of Apple Inc.’s
    AAPL,
    -0.88%
    iPhone 15 launch on the quarter, as estimates call for an overall 1% drop in September-quarter revenue. Last quarter, Apple executives forecast that both Mac and iPad sales would be down by double-digits and that revenue performance would be similar to its June quarter, when revenue fell 1.3%

    In addition, when asked about AI, Apple CEO Tim Cook said the company views AI and machine learning “as core fundamental technologies that are integral to virtually every product that we build.” Those comments, though, can also apply to the bulk of tech companies, where AI is built into software as another layer to improve a product. Internet companies such as Meta Platforms Inc.
    META,
    +0.89%
    and Alphabet Inc.
    GOOG,
    +0.36%

    GOOGL,
    +0.45%
    incorporate AI into their software and algorithms but don’t treat it as a specific, revenue-generating product.

    Other software companies are building AI into their products as separate features or add-ons, but they are still in the early stages of seeing whether or not customers will pay more for them. Take Microsoft Corp.,
    MSFT,
    -0.17%
    which has showed off Copilot, an extra AI feature for customers of Microsoft 365.

    “[Microsoft] can distinguish itself by providing more details around its AI revenue
    ramp since we don’t expect much information from Google, who really doesn’t seem
    to have the monetization plan for Bard and AI-assisted search (SGE) ready to
    articulate yet,” Melius Research analyst Ben Reitzes said in a note to clients this week. He also noted that the cost of offering AI products to consumers is steep, and requires lots of investment.

    “There are sophisticated issues to contend with for Microsoft, including balancing the potential for higher revenue from Copilots with the high costs per query and much-needed investment,” Reitzes said. “The balance of AI adoption vs. cost was implied when Microsoft guided to flat operating margins year over year for fiscal 2024.”

    Earlier this year, the Information reported that OpenAI, the creator of ChatGPT and recipient of a hefty investment from Microsoft, has costs of up to $700,000 a day, because the massive amounts of computing power needed to run queries. In February, OpenAI launched ChatGPT Plus, for $20 a month, a service that will give subscribers access to its AI during peak times and faster response times.

    Another example is Adobe Inc.
    ADBE,
    +1.70%    ,
    which has a few AI offerings, including a subscription service called Generative Credits, tokens that let customers turn text-based prompts into images. Another is Firefly, a generative AI service for images, and an AI option in Photoshop, currently called Photoshop Beta AI, to help users fill in images and other collaborative tools. Adobe did not provide any forecasts on potential revenue generation during its analyst day earlier this month.

    Toni Sacconaghi, a Bernstein Research analyst, said AI could drive a massive increase in enterprise productivity, and companies could dramatically increase IT spending on servers in order to invest in productivity-enhancing AI. “However, we note that enterprise adoption appears to be in early stages,” he said in a recent note to clients, adding that it was feasible that spending on AI infrastructure could take money away from other IT projects in process. “We do worry that projected AI infrastructure build out may be occurring too quickly, necessitating a digestion period, which could result in a commensurate stock pullback in AI-related names.”

    Overall, the information-technology sector itself is expected to see anemic revenue growth this quarter. The consensus on FactSet forecasts a meager 1.35% revenue uptick in the third quarter, with earnings growth of 4.65%. FactSet’s estimates for IT companies exclude internet companies like Meta and Alphabet, which are under the category of communications/interactive media services. That sector is expected to see sales growth of 12%, and earnings growth of 51%, thanks to a 116% boost in Meta’s net income, after it hit a low point in the year-ago quarter.

    Amazon.com Inc.
    AMZN,
    -0.81%    ,
    in the category of consumer discretionary/broadline retail, is forecast to see earnings growth of 109%, and revenue growth of 11%. Amazon’s cloud services business, AWS, is expected to also see a potential uplift from customers spending money on AI projects, according to a TD Cowen & Co. survey, in which 41% of respondents said they were “highly considering” allocating a budget for generative AI.

    “This trend could bode well for Amazon’s AWS,” TD Cowen analyst John Blackledge said in a recent report, adding that he expects AWS revenue growth to reaccelerate in the second half of this year and in 2024, boosted by the move of additional workloads to the cloud, possibly including generative AI.

    As companies build up their infrastructure, or their spending on cloud computing to add or improve AI capabilities, they are seeing higher costs, which is affecting margins — especially if revenue has slowed down, as it has in some sectors. Across both the broader S&P 500
    SPX,
    and the IT sector, earnings are lower than a year ago.

    As Newman of Futurum pointed out, “AI stole the budget this year.” And that is a mixed bag for tech.

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  • Stocks Are Poised to Rise Monday

    Stocks Are Poised to Rise Monday

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    U.S. stocks are poised to rise on Monday ahead of a week of earnings and economic data releases, including quarterly reports from Tesla, Netflix, and .

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  • These 10 college athletes are making over $1 million a year from NIL

    These 10 college athletes are making over $1 million a year from NIL

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    It now pays to be an amateur.

    The NCAA started allowing college athletes to make money from their name, image and likeness in 2021, after decades of student-athletes saying it wasn’t fair that they didn’t receive any money while the games they played in generated millions of dollars — especially football and basketball contests. And today, many of these athletes are not just making some extra cash on the side — they’re making millions.

    These NIL deals are negotiated by college athletes and their representation, and typically involve leveraging an athlete’s brand and influence through promotional means. For example, a car dealership near a university campus may ask the college’s high-profile quarterback to do a commercial for them in exchange for a monetary payment or a car. Similarly, an athlete can make money from social media, depending on how big their following is.

    Football players are among the college athletes who make the most money from NIL deals, followed by men’s basketball, women’s volleyball and women’s basketball. That’s because college football and basketball have multibillion-dollar TV contracts to broadcast games, while most other sports generally have lower visibility.

    With that in mind, here are the college athletes who make the most money from NIL deals according to On3’s proprietary NIL algorithm, which is based on NIL-deal data, performance, influence and exposure

    10. J.J. McCarthy, $1.3 million 

    J.J. McCarthy of the Michigan Wolverines in action against the Georgia Bulldogs.


    Getty Images

    As the junior quarterback for the Michigan Wolverines football team, McCarthy is one of the six college football QBs in the top 10 of NIL earners.

    McCarthy sports 276,000 followers across his social-media platforms, and has deals with Alo, Bose and Bowman.

    Tie-8. Bo Nix, $1.4 million

    Bo Nix of the Oregon Ducks throws a pass against the Stanford Cardinals.


    Getty Images

    The senior QB for the Oregon Ducks has led his team to a perfect 5-0 start this season.

    Nix has 219,000 followers on social media and NIL deals with 7-Eleven, Bojangles and Celsius. Nix is considered one of the top players in the nation and has the third-best betting odds to win college football’s Heisman Trophy on DraftKings
    DKNG,
    -2.52%
    sportsbook.

    Tie-8. Spencer Rattler, $1.4 million

    Spencer Rattler of the South Carolina Gamecocks warms up before a game against the Tennessee Volunteers.


    Getty Images

    The South Carolina Gamecocks senior QB has one of the more robust NIL profiles in the nation. He has deals with Mercedes-Benz
    MBG,
    -1.23%    ,
    Leaf trading cards and Raising Canes.

    Rattler also has 578,000 followers across TikTok, Instagram
    META,
    -0.71%
    and X, the platform formerly known as Twitter.

    7. Angel Reese, $1.7 million

    Angel Reese of the LSU Lady Tigers during the 2023 NCAA Women’s Basketball Tournament championship game.


    Getty Images

    Reese was one of the breakout stars of the women’s March Madness basketball tournament this year. The Louisiana State University hooper led her team to the 2023 title and famously flashed a “you can’t see me” gesture in the title game.

    Reese has brand deals with Airbnb, PlayStation and Intuit TurboTax
    INTU,
    -0.50%
    and has appeared in ads for Amazon
    AMZN,
    +0.01%
    and Pepsi Co.’s
    PEP,
    +0.59%
    Starry. She also has 5.2 million followers across her social-media platforms.

    During LSU’s magical title run last season, Reese set an NCAA single-season record with her 34th double-double against the Iowa Hawkeyes and was named the most outstanding player of the Final Four.

    Reese is one of just two female athletes inside the top 10 in On3’s NIL valuation tracker, and the top college basketball player on the list.

    6. Travis Hunter, $2.3 million

    Travis Hunter of the Colorado Buffaloes signals first down after a catch against the TCU Horned Frogs.


    Getty Images

    Hunter was one of the college football players who transferred to the University of Colorado from Jackson State last season to follow coach Deion Sanders.

    Hunter, a five-star sophomore prospect, plays on both offense and defense — as a wide receiver and a cornerback — a rarity in a high-level college program. He has 1.9 million followers on social media, a successful YouTube
    GOOG,
    -0.08%
    channel, and endorsements with Celsius Energy Drink and 7-Eleven.

    Hunter entered the 2023 college season as the most highly touted NFL prospect at Colorado, and Deion Sanders contends rival schools have attempted to poach him via lucrative NIL deals.

    “People offered Travis Hunter a bag — about $1.5 million to try to lure him and buy him out of the transfer portal,” coach Sanders told 247Sports over the summer. “But Travis is not the kind of guy that can be bought. He isn’t built like that. Travis is a relational young man that is built on relationships and stability. And that’s what he wanted and desired. That is why he decided to ride and stay with us.”

    If and when Hunter decides to declare for the NFL draft, he will likely have a multimillion-dollar contract as a rookie that could dwarf his collegiate NIL earnings.

    5. Caleb Williams, $2.7 million

    Caleb Williams of the USC Trojans warms up before a game against the Arizona State Sun Devils.


    Getty Images

    The University of Southern California QB is seen as a generational NFL prospect and the presumptive No. 1 overall pick in the 2024 NFL draft, but he isn’t the top NIL earner.

    Williams has 347,000 followers on social media, and brand deals with United Airlines
    UAL,
    -1.24%    ,
    Alo and Beats by Dre.

    Once the USC junior QB declares for the draft, his rookie contract will likely be set above $37 million, per Spotrac’s estimates.

    4. Arch Manning, $2.8 million

    Arch Manning of the Texas Longhorns warms up prior to a game against the Alabama Crimson Tide.


    Getty Images

    The Texas Longhorns freshman QB is one of several top NIL earners whose family plays a role in their fame. Arch Manning is the nephew of Super Bowl champion QBs Peyton and Eli Manning, and the grandson of former NFL QB Archie Manning.

    Despite being a backup quarterback with no recorded statistics, the younger Manning has 277,000 followers on social media and has a brand deal with Panini. That deal involved him autographing an extremely rare one-of-one Prizm Black card that was auctioned off for $102,500, which was later donated to charity.

    Manning was a standout high school recruit, ranked No. 5 in the nation in the 2023 class, and could have an NFL future.

    3. Livvy Dunne, $3.2 million

    Olivia Dunne of LSU looks on during a PAC-12 meet against Utah.


    Getty Images

    Dunne is the only college athlete in the top 10 of NIL earners who doesn’t play basketball or football. The junior LSU gymnast is the top female NIL earner in the nation and has brand deals with Vuori clothing, Body Armor
    KO,
    +0.62%
    and American Eagle Outfitters.

    Dunne is the second most-followed college athlete on social media with 12.1 million followers on Instagram, TikTok and X combined.

    For many years Dunne was seen as the poster child for NIL deals, and she said earlier this year that she could make as much as $500,000 from a single post.

    “What I love with certain brands is getting long-term brand deals,” Dunne said on the Full Send podcast in June. “Those are probably the best because you build a relationship with the brand and they want you year after year.”

    2. Shedeur Sanders, $4.8 million

    Shedeur Sanders of the Colorado Buffaloes celebrates as he walks off the field following an NCAAF game against the Arizona State Sun Devils.


    Getty Images

    University of Colorado’s Shedeur Sanders has become a phenomenon in the sports world. The 21-year-old junior made headlines after throwing for 510 yards and four touchdowns in Colorado’s season-opening shocker against No. 17–ranked Texas Christian.

    Colorado has become the center of the football world since Shedeur’s father Deion took over as coach. Coach Prime’s team is currently 4-2 — the team was 1-11 last season, good for last place in its conference.

    The quarterback has more than 2.3 million followers on social media, and has already inked several deals with big brands, including with yogurt producer Oikos
    0KFX,
    -1.13%    ,
    Gatorade and Mercedes-Benz. He has shown fans some of his new Mercedes cars on social media, too.

    Overall, Shedeur Sanders’s NIL value currently sits at $4.8 million, according to On3, up from $1.5 million at the beginning of the year — that’s the highest value in all of college football. For context, that’s nearly twice the average NFL player’s salary.

    1. Bronny James, $5.9 million

    Bronny James playing at his high school, Sierra Canyon.


    Getty Images

    James has perhaps the most famous family member of any person on this list. He is the son of NBA legend LeBron James, and is currently set to begin his freshman basketball season at USC.

    The younger James has yet to play a game at his new school, but will immediately be one of the most well-known players in college athletics. James has 13.5 million social media followers, the most of any college athlete, and has brand deals with Nike
    NKE,
    +1.10%
    and Beats by Dre
    AAPL,
    -0.06%    ,
    two brands his dad is also repped by.

    Bronny James suffered cardiac arrest in July during a basketball practice and had to be taken to the hospital. But he’s on the road to recovery, and hopes to play basketball this season.

    “Bronny is doing extremely well,” the older James said last week. “He has begun his rehab process to get back on the floor this season with his teammates at USC. (With) the successful surgery that he had, he’s on the up-and-up. It’s definitely a whirlwind, a lot of emotions for our family this summer. But the best thing we have is each other.”

    See also: Michael Jordan is now worth $3 billion. Here’s what billionaire athletes have in common.

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  • Ford, Microsoft, Delta, Walgreens, Birkenstock, and More Stock Market Movers

    Ford, Microsoft, Delta, Walgreens, Birkenstock, and More Stock Market Movers

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    Stock futures posted modest gains Thursday ahead of a report likely to show that U.S. inflation fell in September as gasoline price growth slowed and used-car costs declined.

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  • These 20 stocks in the S&P 500 are expected to soar after rising interest rates have pushed down valuations

    These 20 stocks in the S&P 500 are expected to soar after rising interest rates have pushed down valuations

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    Two things investors can be sure about: Nothing lasts forever and the stock market always overreacts. The spiking of yields on long-term U.S. Treasury securities has been breathtaking, and it has led to remarkable declines for some sectors and possible bargains for contrarian investors who can commit for the long term.

    First we will show how the sectors of the S&P 500

    have performed. Then we will look at price-to-earnings valuations for the sectors and compare them to long-term averages. Then we will screen the entire index for companies trading below their long-term forward P/E valuation averages and narrow the list to companies most favored by analysts.

    Here are total returns, with dividends reinvested, for the 11 sectors of the S&P 500, with broad indexes below. The sectors are sorted by ascending total returns this year through Monday.

    Sector or index

    		 2023 return

    		 2022 return

    		 Return since end of 2021

    		 1 week return

    		 1 month return
    Utilities

    		 -18.4%

    		 1.6%

    		 -17.2%

    		 -11.1%

    		 -9.6%
    Real Estate

    		 -7.1%

    		 -26.1%

    		 -31.4%

    		 -3.0%

    		 -8.8%
    Consumer Staples

    		 -5.4%

    		 -0.6%

    		 -6.0%

    		 -2.2%

    		 -4.4%
    Healthcare

    		 -4.2%

    		 -2.0%

    		 -6.1%

    		 -1.7%

    		 -3.3%
    Financials

    		 -2.5%

    		 -10.5%

    		 -12.7%

    		 -2.5%

    		 -4.7%
    Materials

    		 1.3%

    		 -12.3%

    		 -11.2%

    		 -1.9%

    		 -7.0%
    Industrials

    		 3.5%

    		 -5.5%

    		 -2.1%

    		 -1.8%

    		 -7.3%
    Energy

    		 4.0%

    		 65.7%

    		 72.4%

    		 -1.9%

    		 -1.4%
    Consumer Discretionary

    		 27.0%

    		 -37.0%

    		 -20.0%

    		 -0.6%

    		 -5.2%
    Information Technology

    		 36.5%

    		 -28.2%

    		 -2.0%

    		 0.8%

    		 -5.9%
    Communication Services

    		 42.5%

    		 -39.9%

    		 -14.3%

    		 1.1%

    		 -1.3%
    S&P 500
    		 13.1%

    		 -18.1%

    		 -7.4%

    		 -1.1%

    		 -4.9%
    DJ Industrial Average
    		 2.5%

    		 -6.9%

    		 -4.5%

    		 -1.7%

    		 -4.0%
    Nasdaq Composite Index
    COMP     		28.0%

    		 -32.5%

    		 -13.7%

    		 0.3%

    		 -5.1%
    Nasdaq-100 Index
    		 36.5%

    		 -32.4%

    		 -7.7%

    		 0.5%

    		 -4.2%
    Source: FactSet

    Returns for 2022 are also included, along with those since the end of 2021. Last year’s weakest sector, communications services, has been this year’s strongest performer. This sector includes Alphabet Inc.
    GOOGL
    and Meta Platforms Inc.
    META,
    which have returned 52% and 155% this year, respectively, but are still down since the end of 2021. To the right are returns for the past week and month through Monday.

    On Monday, the S&P 500 Utilities sector had its worst one-day performance since 2020, with a 4.7% decline. Investors were reacting to the jump in long-term interest rates.

    Here is a link to the U.S. Treasury Department’s summary of the daily yield curve across maturities for Treasury securities.

    The yield on 10-year U.S. Treasury notes

    jumped 10 basis points in only one day to 4.69% on Monday. A month earlier the 10-year yield was only 4.27%. Also on Monday, the yield on 20-year Treasury bonds

    rose to 5.00% from 4.92% on Friday. It was up from 4.56% a month earlier.

    Market Extra: Bond investors feel the heat as popular fixed-income ETF suffers lowest close since 2007

    The Treasury yield curve is still inverted, with 3-month T-bills

    yielding 5.62% on Monday, but that was up only slightly from a month earlier. An inverted yield curve has traditionally signaled that bond investors expect a recession within a year and a lowering of interest rates by the Federal Reserve. Demand for bonds pushes their prices down. But the reverse has happened over recent days, with the selling of longer-term Treasury securities pushing yields up rapidly.

    Another way to illustrate the phenomenon is to look at how the Federal Reserve has shifted the U.S. money supply. Odeon Capital analyst Dick Bove wrote in a note to clients on Friday that “the Federal Reserve has not deviated from its policy to defeat inflation by tightening monetary policy,” as it has shrunk its balance sheet (mostly Treasury securities) to $8.1 trillion from $9 trillion in March 2022. He added: “The M2 money supply was $21.8 trillion in March 2022; today it is $20.8 trillion. You cannot get tighter than these numbers indicate.”

    Then on Tuesday, Bove illustrated the Fed’s tightening and the movement of the 10-year yield with two charts:


    Odeon Capital Group, Bloomberg

    Bove said he believes the bond market has gotten it wrong, with the inverted yield curve reflecting expectations of rate cuts next year. If he is correct, investors can expect longer-term yields to keep shooting up and a normalization of the yield curve.

    This has set up a brutal environment for utility stocks, which are typically desired by investors who are seeking dividend income. In a market in which you can receive a yield of 5.5% with little risk over the short term, and in which you can lock in a long-term yield of about 5%, why take a risk in the stock market? And if you believe that the core inflation rate of 3.7% makes a 5% yield seem paltry, keep in mind that not all investors think the same way. Many worry less about the inflation rate because large components of official inflation calculations, such as home prices and car prices, don’t affect everyone every year.

    We cannot know when this current selloff of longer-term bonds will end, or how much of an effect it will have on the stock market. But sharp declines in the stock market can set up attractive price points for investors looking to go in for the long haul.

    Screening for lower valuations and high ratings

    A combination of rising earnings estimates and price declines could shed light on potential buying opportunities, based on forward price-to-earnings ratios.

    Let’s look at the sectors again, in the same order, this time to show their forward P/E ratios, based on weighted rolling 12-month consensus estimates for earnings per share among analysts polled by FactSet:

    Sector or index

    		 Current P/E to 5-year average

    		 Current P/E to 10-year average

    		 Current P/E to 15-year average

    		 Forward P/E

    		 5-year average P/E

    		 10-year average P/E

    		 15-year average P/E
    Utilities

    		 82%

    		 86%

    		 95%

    		 14.99

    		 18.30

    		 17.40

    		 15.82
    Real Estate

    		 76%

    		 80%

    		 81%

    		 15.19

    		 19.86

    		 18.89

    		 18.72
    Consumer Staples

    		 93%

    		 96%

    		 105%

    		 18.61

    		 19.92

    		 19.30

    		 17.64
    Healthcare

    		 103%

    		 104%

    		 115%

    		 16.99

    		 16.46

    		 16.34

    		 14.72
    Financials

    		 88%

    		 92%

    		 97%

    		 12.90

    		 14.65

    		 14.08

    		 13.26
    Materials

    		 100%

    		 103%

    		 111%

    		 16.91

    		 16.98

    		 16.42

    		 15.27
    Industrials

    		 88%

    		 96%

    		 105%

    		 17.38

    		 19.84

    		 18.16

    		 16.56
    Energy

    		 106%

    		 63%

    		 73%

    		 11.78

    		 11.17

    		 18.80

    		 16.23
    Consumer Discretionary

    		 79%

    		 95%

    		 109%

    		 24.09

    		 30.41

    		 25.39

    		 22.10
    Information Technology

    		 109%

    		 130%

    		 146%

    		 24.20

    		 22.17

    		 18.55

    		 16.54
    Communication Services

    		 86%

    		 86%

    		 94%

    		 16.41

    		 19.09

    		 19.00

    		 17.43
    S&P 500
    		 94%

    		 101%

    		 112%

    		 17.94

    		 19.01

    		 17.76

    		 16.04
    DJ Industrial Average
    		 93%

    		 98%

    		 107%

    		 16.25

    		 17.49

    		 16.54

    		 15.17
    Nasdaq Composite Index
    		 92%

    		 102%

    		 102%

    		 24.62

    		 26.71

    		 24.18

    		 24.18
    Nasdaq-100 Index
    		 97%

    		 110%

    		 126%

    		 24.40

    		 25.23

    		 22.14

    		 19.43

    There is a limit to how many columns we can show in the table. The S&P 500’s forward P/E ratio is now 17.94, compared with 16.79 at the end of 2022 and 21.53 at the end of 2021. The benchmark index’s P/E is above its 10- and 15-year average levels but below the five-year average.

    If we compare the current sector P/E numbers to 5-, 10- and 15-year averages, we can see that the current levels are below all three averages for four sectors: utilities, real estate, financials and communications services. The first three face obvious difficulties as they adjust to the rising-rate environment, while the real-estate sector reels from continuing low usage rates for office buildings, from the change in behavior brought about by the COVID-19 pandemic.

    Your own opinions, along with the pricing for some sectors, might drive some investment choices.

    A broader screen of the S&P 500 might point to companies for you to research further.

    We narrowed the S&P 500 as follows:

    • Current forward P/E below 5-, 10- and 15-year average valuations. For stocks with negative earnings-per-share estimates for the next 12 months, there is no forward P/E ratio so they were excluded. For stocks listed for less than 15 years, we required at least a 5-year average P/E for comparison. This brought the list down to 138 companies.

    • “Buy” or equivalent ratings from at least two-thirds of analysts: 41 companies.

    Here are the 20 companies that passed the screen, for which analysts’ price targets imply the highest upside potential over the next 12 months.

    There is too much data for one table, so first we will show the P/E information:

    Company

    		 Ticker

    		 Current P/E to 5-year average

    		 Current P/E to 10-year average

    		 Current P/E to 15-year average
    SolarEdge Technologies Inc.

    		 SEDG 89%

    		 N/A

    		 N/A
    AES Corp.

    		 AES 66%

    		 75%

    		 90%
    Insulet Corp.

    		 PODD 18%

    		 N/A

    		 N/A
    United Airlines Holdings Inc.

    		 UAL 42%

    		 50%

    		 N/A
    Alaska Air Group Inc.

    		 ALK 51%

    		 57%

    		 N/A
    Tapestry Inc.

    		 TPR 39%

    		 49%

    		 70%
    Albemarle Corp.

    		 ALB 39%

    		 50%

    		 73%
    Delta Air Lines Inc.

    		 DAL 60%

    		 63%

    		 21%
    Alexandria Real Estate Equities Inc.

    		 ARE 59%

    		 68%

    		 N/A
    Las Vegas Sands Corp.

    		 LVS 96%

    		 78%

    		 53%
    Paycom Software Inc.

    		 PAYC 61%

    		 N/A

    		 N/A
    PayPal Holdings Inc.

    		 PYPL 33%

    		 N/A

    		 N/A
    SBA Communications Corp. Class A

    		 SBAC 27%

    		 N/A

    		 N/A
    Advanced Micro Devices Inc.

    		 AMD 58%

    		 39%

    		 N/A
    LKQ Corp.

    		 LKQ 92%

    		 44%

    		 78%
    Charles Schwab Corp.

    		 SCHW 75%

    		 54%

    		 73%
    PulteGroup Inc.

    		 PHM 94%

    		 47%

    		 N/A
    Lamb Weston Holdings Inc.

    		 LW 71%

    		 N/A

    		 N/A
    News Corp Class A

    		 NWSA 93%

    		 73%

    		 N/A
    CVS Health Corp.

    		 CVS 75%

    		 61%

    		 67%
    Source: FactSet

    Click on the tickers for more about each company or index.

    Click here for Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.

    News Corp
    NWSA
    is on the list. The company owns Dow Jones, which in turn owns MarketWatch.

    Here’s the list again, with ratings and consensus price-target information:

    Company

    		 Ticker

    		 Share “buy” ratings

    		 Oct. 2 price

    		 Consensus price target

    		 Implied 12-month upside potential
    SolarEdge Technologies Inc.

    		 SEDG 74%

    		 $122.56

    		 $268.77

    		 119%
    AES Corp.

    		 AES 79%

    		 $14.16

    		 $25.60

    		 81%
    Insulet Corp.

    		 PODD 68%

    		 $165.04

    		 $279.00

    		 69%
    United Airlines Holdings Inc.

    		 UAL 71%

    		 $41.62

    		 $69.52

    		 67%
    Alaska Air Group Inc.

    		 ALK 87%

    		 $36.83

    		 $61.31

    		 66%
    Tapestry Inc.

    		 TPR 75%

    		 $28.58

    		 $46.21

    		 62%
    Albemarle Corp.

    		 ALB 81%

    		 $162.41

    		 $259.95

    		 60%
    Delta Air Lines Inc.

    		 DAL 95%

    		 $36.45

    		 $58.11

    		 59%
    Alexandria Real Estate Equities Inc.

    		 ARE 100%

    		 $98.18

    		 $149.45

    		 52%
    Las Vegas Sands Corp.

    		 LVS 72%

    		 $45.70

    		 $68.15

    		 49%
    Paycom Software Inc.

    		 PAYC 77%

    		 $260.04

    		 $384.89

    		 48%
    PayPal Holdings Inc.

    		 PYPL 69%

    		 $58.56

    		 $86.38

    		 48%
    SBA Communications Corp. Class A

    		 SBAC 68%

    		 $198.24

    		 $276.69

    		 40%
    Advanced Micro Devices Inc.

    		 AMD 74%

    		 $103.27

    		 $143.07

    		 39%
    LKQ Corp.

    		 LKQ 82%

    		 $49.13

    		 $67.13

    		 37%
    Charles Schwab Corp.

    		 SCHW 77%

    		 $53.55

    		 $72.67

    		 36%
    PulteGroup Inc.

    		 PHM 81%

    		 $73.22

    		 $98.60

    		 35%
    Lamb Weston Holdings Inc.

    		 LW 100%

    		 $92.23

    		 $123.50

    		 34%
    News Corp Class A

    		 NWSA 78%

    		 $20.00

    		 $26.42

    		 32%
    CVS Health Corp.

    		 CVS 77%

    		 $69.69

    		 $90.88

    		 30%
    Source: FactSet

    A year may actually be a short period for a long-term investor, but 12-month price targets are the norm for analysts working for brokerage companies.

    Don’t miss: This fund shows that industry expertise can help you make a lot of money in the stock market

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  • Apple says it will fix app software problems blamed for making iPhone 15 models too hot to handle

    Apple says it will fix app software problems blamed for making iPhone 15 models too hot to handle

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    Apple Inc. is blaming a software bug and other issues tied to popular apps such as Instagram and Uber for causing its recently released iPhone 15 models to heat up and spark complaints about becoming too hot to handle.

    The Cupertino, Calif., company
    AAPL,
    +0.30%
    said Saturday that it is working on an update to the iOS17 system that powers the iPhone 15 lineup to prevent the devices from becoming uncomfortably hot and is working with apps that are running in ways “causing them to overload the system.”

    Instagram, owned by Meta Platforms
    META,
    -1.23%    ,
    modified its social media app earlier this week to prevent it from heating up the device on the latest iPhone operating system.

    Read: The Magnificent Seven could be considered the messy seven after a ‘meh’ third quarter

    Uber
    UBER,
    -0.33%
    and other apps such as the video game Asphalt 9 are still in the process of rolling out their updates, Apple said. It didn’t specify a timeline for when its own software fix would be issued but said no safety issues should prevent iPhone 15 owners from using their devices while awaiting the update.

    “We have identified a few conditions which can cause iPhone to run warmer than expected,” Apple in a short statement provided to The Associated Press after media reports detailed overheating complaints that are peppering online message boards.

    The Wall Street Journal amplified the worries in a story citing the overheating problem in its own testing of the new iPhones, which went on sale a week ago.

    Read: Here’s what Apple’s iPhone 15 says about the world

    It’s not unusual for new iPhones to get uncomfortably warm during the first few days of use or when they are being restored with backup information stored in the cloud — issues that Apple already flags for users. The devices also can get hot when using apps such as video games and augmented reality technology that require a lot of processing power, but the heating issues with the iPhone 15 models have gone beyond those typical situations.

    In its acknowledgement, Apple stressed that the trouble isn’t related to the sleek titanium casing that houses the high-end iPhone 15 Pro and iPhone 15 Pro Max instead of the stainless steel used on older smartphones.

    Apple also dismissed speculation that the overheating problem in the new models might be tied to a shift from its proprietary Lightning charging cable to the more widely used USB-C port that allowed it to comply with a mandate issued by European regulators.

    Although Apple expressed confidence that the overheating issue can be quickly fixed with the upcoming software updates, the problem still could dampen sales of its marquee product at time when the company has faced three consecutive quarters of year-over-year declines in overall sales.

    The downturn has affected iPhone sales, which fell by a combined 4% in the nine months covered by Apple’s past three fiscal quarters compared with a year earlier.

    Apple is trying to pump up its sales in part by raising the starting price for its top-of-the-line iPhone 15 Pro Max to $1,200, an increase of $100, or 9%, from last year’s comparable model.

    Investor worries about Apple’s uncharacteristic sales funk already have wiped out more than $300 billion in shareholder wealth since the company’s market value closed at $3 trillion for the first time in late June.

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  • Instagram, other social media should be banned for anyone 16 and under, Ramaswamy says at GOP debate

    Instagram, other social media should be banned for anyone 16 and under, Ramaswamy says at GOP debate

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    Republican presidential hopeful Vivek Ramaswamy took aim at social-media companies during the second GOP presidential debate, saying Wednesday night that he would aim to ban anyone age 16 or under from using those companies’ platforms.

    “If you’re 16 years old or under, you should not be using an addictive social-media product — period,” said Ramaswamy, an entrepreneur who ranks fourth in GOP primary polls, according a RealClearPolitics average.

    He said this move would help with improving mental health and stopping the fentanyl epidemic. Earlier, Ramaswamy had talked about a mom and dad in Iowa whose son died after the teen bought Percocet laced with fentanyl through Snapchat.

    That type of ban would hit companies such as Meta Platforms
    META,
    -0.41%    ,
    the parent of Instagram and Facebook; Snap
    SNAP,
    +1.80%    ,
    the parent of Snapchat; X, formerly known as Twitter; and ByteDance, the Chinese parent of TikTok.

    Ramaswamy has started using TikTok in his White House campaign, and another GOP presidential candidate, former U.N. Ambassador Nikki Haley, attacked him over that at another point in the debate.

    “TikTok is one of the most dangerous social-media apps we could have,” she said. “Honestly, every time I hear you, I feel a little bit dumber.”

    Now read: Could Congress actually ban TikTok in the U.S.? Analysts see ‘procedural and practical hurdles’

    And see: GOP presidential debate: DeSantis says Trump’s spending ‘set the stage for the inflation that we have now’

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  • FedEx, Klaviyo, KB Home, CrowdStrike, and More Stock Market Movers

    FedEx, Klaviyo, KB Home, CrowdStrike, and More Stock Market Movers

    [ad_1]

    This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers visit http://www.djreprints.com.

    https://www.barrons.com/articles/stock-market-movers-cd3606a2

    • Order Reprints
    • Print Article
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  • KB Home stock slips despite earnings beat, raised forecast and ‘steady’ demand

    KB Home stock slips despite earnings beat, raised forecast and ‘steady’ demand

    [ad_1]

    KB Home shares declined in the extended session Wednesday even after the home builder reported results that topped Wall Street estimates, hiked its revenue forecast for the year and reported steady demand amid rising mortgage rates.

    KB Home KBH shares slid more than 2% after hours, following a 0.7% decline in the regular session to close at $48.06.

    The…

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  • Instacart, Ford, Pinterest, Coty, Dollar General, Intel, and More Stock Market Movers

    Instacart, Ford, Pinterest, Coty, Dollar General, Intel, and More Stock Market Movers

    [ad_1]

    This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers visit http://www.djreprints.com.

    https://www.barrons.com/articles/stock-market-movers-457cee3b

    • Order Reprints
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  • Klaviyo reportedly raises price range of its upcoming IPO

    Klaviyo reportedly raises price range of its upcoming IPO

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    Klaviyo Inc. is reportedly raising the target of its upcoming initial public offering to more than $550 million.

    Bloomberg News reported late Sunday that Klaviyo has decided to raise the target range for its shares to $27 to $29, up from its previously stated range of $25 to $27 a share. At the top of that new range, the IPO would raise $557 million, with the company valued at about $8.7 billion, according to Bloomberg.

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  • Stocks are trapped in a trading range. Something’s got to give.

    Stocks are trapped in a trading range. Something’s got to give.

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    The U.S. stock market, as measured by the S&P 500 Index SPX, is trapped in a trading range, and volatility seems to be damping down considerably. The significant edges of the trading range are support at 4330 and resistance at 4540. Both of those levels were touched in the latter half of August. A breakout from this range should give the market some strong directional momentum. 

    Since Labor Day, prices have hunkered down into an even narrower range. Typically, the latter half of September through the early part of October…

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  • Tech’s wild week: How Apple, Google, AI, Arm’s mega IPO could set the agenda for years

    Tech’s wild week: How Apple, Google, AI, Arm’s mega IPO could set the agenda for years

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    The second week of September, as in the NFL, marks a kickoff of sorts for the tech year.

    Headlined by Apple Inc.’s
    AAPL,
    +0.72%
    seminal iPhone event on the second Tuesday of the month at Apple Park, and anchored by Salesforce Inc.’s
    CRM,
    +0.33%
    wildly popular Dreamforce conference up the road in San Francisco, these several days set a tempo as well as establish a road map for the industry over the next 12 months. They also open the floodgates on tech conference season, with shows stacked up over the next several weeks for Facebook parent Meta Platforms Inc.
    META,
    +3.33%    ,
    Microsoft Corp.
    MSFT,
    +1.21%    ,
    and Oracle Corp.
    ORCL,
    +0.32%    .

    Oh, and there’s that initial public offering from Arm Holdings Plc, the chip designer owned by SoftBank Group Corp.
    9984,
    +3.86%
    that is expected to value Arm at $50 billion to $54.5 billion on a fully diluted basis. Another IPO candidate, delivery startup Instacart, also plans a public offering that would value it at $7.5 billion. Both deals could jump-start what has been a somnolent tech IPO market the past few years.

    For that reason alone, this jam-packed tech week might hold even more import, and consequences, than previous years. A confluence of legal tussles, macroeconomic conditions, a trade war with China, and regulatory bluster have raised the stakes.

    “It’s a tale of two cities with this week’s events highlighting both the issues and opportunities in tech,” Silicon Valley analyst Maribel Lopez said in an interview, assessing the week. “Arm’s IPO showcases the strength of tech and AI at a time when the AI forum and Google-DoJ shine a light on the concern that a few companies are wielding tremendous power for the future of the world.”

    Consider: Hours before Apple is expected to unveil a new crop of iPhones more noteworthy for pricing than features, Alphabet Inc.’s
    GOOGL,
    +0.51%

    GOOG,
    +0.47%
    Google faces off with the Justice Department in a federal court in Washington, D.C.

    Justice Department officials argue that Google illegally leveraged agreements with phone makers such as Apple and Samsung Electronics Co.
    005930,
    +0.71%
     and with internet browsers like Mozilla to be the default search engine for their customers, thus preventing smaller rivals from gaining access to that business.

    “This is a backwards-looking case at a time of unprecedented innovation, including breakthroughs in AI, new apps and new services, all of which are creating more competition and more options for people than ever before,” Google General Counsel Kent Walker said in a statement.

    The following day, Wednesday, Senate Majority Leader Chuck Schumer, D-N.Y., convenes an all-star panel of CEOs from Meta, Microsoft, Google, OpenAI and Palantir Technologies Inc.
    PLTR,
    +4.82%    .

    As lawmakers ruminate on how to harness AI responsibly, bipartisan legislation is in the works. Sens. Richard Blumenthal, D-Conn., and Josh Hawley, R-Mo., are among those crafting a bill.

    Even Apple and Salesforce aren’t immune from recent events: Apple has endured a relatively rough patch of disappointing (for them) revenue and iPhone sales while balancing risk/reward with its huge investment in China, and Salesforce CEO Marc Benioff has threatened to relocate Dreamforce to Las Vegas after more than two decades in his hometown of San Francisco if drug use and homelessness disrupt this year’s event.

    The most pressing concern, when all is said and done, is AI — which hovers like the Death Star over the tech landscape.

    “The biggest concern is the forum is behind closed doors, which could lead to regulatory capture, where dominant players in the industry help influence the regulations being imposed,” Kimberlee Josephson, associate professor of business administration at Lebanon Valley College (Pa.), said in an interview. “It’s almost as if it puts them in the hot while giving them a seat at the table at the same time.”

    “At the very least, it sends the signal that something is being done,” she said. “Antitrust cases are so subjective. What constitutes barriers to entry? DoJ adds a level of seriousness.”

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  • Here’s an easy way to make a more concentrated play on the ‘Magnificent Seven’ stocks

    Here’s an easy way to make a more concentrated play on the ‘Magnificent Seven’ stocks

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    Investors in index funds have been well rewarded by a high concentration in the largest technology companies over the past decade. But there are also continuing warnings about the risk of such heavy concentrations, even in index funds that track the S&P 500. Solutions are offered to limit this risk, but if you expect Big Tech to continue to drive the broad market returns over the coming years, why not make an even more focused bet?

    Comparisons of three index-fund approaches highlight how successful concentration in the “Magnificent Seven” has been.

    The Magnificent Seven are Apple Inc.
    AAPL,
    +0.16%    ,
    Microsoft Corp.
    MSFT,
    +0.72%    ,
    Nvidia Corp.
    NVDA,
    -2.03%    ,
    Amazon.com Inc.
    AMZN,
    +2.17%    ,
    Alphabet Inc.
    GOOGL,
    -0.27%

    GOOG,
    -0.32%    ,
    Tesla Inc.
    TSLA,
    +9.37%
    and Meta Platforms Inc.
    META,
    +1.67%    .
    We have listed them in the order of their concentration within the Invesco S&P 500 ETF Trust
    SPY,
    which tracks the S&P 500
    SPX.
    The U.S. benchmark index is weighted by market capitalization, as is the Nasdaq Composite Index
    COMP
    and the Russell indexes.

    SPY is 27.6% concentrated in the Magnificent Seven. One way to play the same group of 500 stocks but eliminate concentration risk is to take an equal-weighted approach to the index, which has worked well for certain long periods. But here, we’re focusing on how well the concentrated strategy has worked.

    Let’s take a look at the group’s concentration in three popular index approaches, then look at long-term performance and consider what happened in 2022 as rising interest rates helped crush the tech sector.

    Here are the portfolio weightings for the Magnificent Seven in SPY, along with those of the Invesco QQQ Trust
    QQQ,
    which tracks the Nasdaq-100 Index
    NDX
    and the Invesco S&P 500 Top 50 ETF
    XLG
    :

    Company

    		 Ticker

    		 % of SPY

    		 % of QQQ

    		 % of XLG
    Apple Inc.

    		 AAPL,
    +0.16%         		7.05%

    		 10.85%

    		 12.46%
    Microsoft Cor.

    		 MSFT,
    +0.72%         		6.65%

    		 9.53%

    		 11.76%
    Amazon.com Inc.

    		 AMZN,
    +2.17%         		3.30%

    		 5.50%

    		 5.84%
    Nvidia Corp.

    		 NVDA,
    -2.03%         		3.02%

    		 4.44%

    		 5.33%
    Alphabet Inc. Class A

    		 GOOGL,
    -0.27%         		2.17%

    		 3.12%

    		 3.83%
    Alphabet Inc. Class C

    		 GOOG,
    -0.32%         		1.88%

    		 3.11%

    		 3.32%
    Tesla Inc.

    		 TSLA,
    +9.37%         		1.79%

    		 3.10%

    		 3.17%
    Meta Platforms Inc. Class A

    		 META,
    +1.67%         		1.77%

    		 3.60%

    		 3.12%
    Totals

    		  

    		 27.63%

    		 43.25%

    		 48.83%
    Sources: Invesco Ltd., State Street Corp.

    The same group of seven companies (eight stocks with two common share classes for Alphabet) is at the top of each exchange-traded fund’s portfolio, although the top seven for QQQ aren’t in the same order as those for SPY and XLG. QQQ’s weighting was changed recently as the underlying Nasdaq-100 underwent a “special rebalancing” last month.

    Here’s a five-year chart comparing the performance of the three approaches. All returns in this article include reinvested dividends.


    FactSet

    QQQ has been the clear winner for five years, but it is also worth noting how well XLG has performed when compared with SPY. This “top 50” approach to the S&P 500 incorporates many stocks that aren’t listed on the Nasdaq and therefore cannot be included in QQQ, which itself is made up of the largest 100 nonfinancial companies in the full Nasdaq Composite Index
    COMP,
    +0.45%    .

    Examples of stocks held by XLG that aren’t held by QQQ include such non-tech stalwarts as Berkshire Hathaway Inc.
    BRK.B,
    +0.77%    ,
    Johnson & Johnson
    JNJ,
    +0.79%    ,
    Procter & Gamble Co.
    PG,
    +0.94%    ,
    Home Depot Inc.
    HD,
    -0.12%
    and Nike Inc.
    NKE,
    -0.42%    .

    Now let’s go deeper into long-term performance. First, here are the total returns for various time periods:

    ETF

    		 3 Years

    		 5 Years

    		 10 Years

    		 15 Years

    		 20 Years
    SPDR S&P 500 ETF Trust
    SPY     		40%

    		 69%

    		 223%

    		 370%

    		 531%
    Invesco QQQ Trust
    QQQ     		41%

    		 113%

    		 430%

    		 882%

    		 1,158%
    Invesco S&P 500 Top 50 ETF
    XLG     		41%

    		 85%

    		 262%

    		 404%

    		 N/A
    Source: FactSet

    Click on the tickers for more about each ETF, company or index.

    Click here for Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.

    There is no 20-year return for XLG because this ETF was established in 2005.

    For five years and longer, QQQ has been the runaway leader, but for 5, 10 and 15 years, XLG has also beaten SPY handily, with broader industry exposure.

    Something else to consider is that during 2022, when SPY was down 18.2%, XLG fell 24.3% and QQQ dropped 32.6%.

    For disciplined long-term investors, the tech pain of 2022 may not seem to have been a small price to pay for outperformance. And it may have been easier to take the pounding when holding SPY or even XLG that year.

    Here’s a look at the average annual returns for the three ETFs:

    ETF

    		 3 years

    		 5 years

    		 10 years

    		 15 years

    		 20 years
    SPDR S&P 500 ETF Trust
    SPY     		11.8%

    		 11.0%

    		 12.4%

    		 10.9%

    		 9.6%
    Invesco QQQ Trust
    QQQ     		12.0%

    		 16.3%

    		 18.2%

    		 16.4%

    		 13.5%
    Invesco S&P 500 Top 50 ETF
    XLG     		12.2%

    		 13.1%

    		 13.7%

    		 11.4%

    		 N/A
    Source: FactSet

    So the question remains — do you believe that the largest technology companies will continue to lead the stock market for the next decade at least? If so, a more concentrated index approach may be for you, provided you can withstand the urge to sell into a declining market, such as the one we experienced last year.

    Here is something else to keep in mind. In a note to clients on Monday, Doug Peta, the chief U.S. investment strategist at BCA, made a fascinating point: “The only novel development is that all the heaviest hitters now hail from Tech and Tech-adjacent sectors and are therefore more prone to move together than they were at the end of 2004, when the seven largest stocks came from six different sectors. “

    Nothing lasts forever. Peta continued by suggesting that investors who are tired of big tech taking all the glory “need only wait.”

    “[I]f history is any guide, their time at the top of the capitalization scale will be short,” he wrote.

    Don’t miss: These four Dow stocks take top prizes for dividend growth

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  • Just how much is the AI discourse helping stocks? An analyst scoured earnings calls for clues

    Just how much is the AI discourse helping stocks? An analyst scoured earnings calls for clues

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    Talking about AI alone has been pixie dust for big technology stocks this year. And as executives look for any way to shoehorn AI into their business plans, more S&P 500 index companies during their second quarter earnings calls mentioned “AI” than at any point since at least 2010, according to a report published on Friday.

    What’s more, according to the report from FactSet, the companies talking about AI — even the ones that aren’t the big, obvious tech names — have seen their stocks fare better than shares of companies that haven’t.

    For S&P 500 companies that mentioned “AI” on their second-quarter earnings calls, shares on average since June 30 dipped 0.8%, while rising 13.3% since Dec. 31, FactSet said. For companies that didn’t talk about AI on those calls, shares on average fell a bit more since the end of June — 2.3% — while inching only 1.5% higher since the end of last year.

    “Even excluding the ‘Magnificent Seven’ (Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla), the S&P 500 companies that cited ‘AI’ still outperformed the S&P 500 companies that did not cite ‘AI’ on average during these periods,” FactSet Senior Earnings Analyst John Butters said in the report.

    Meanwhile, Wall Street has long believed corporate America’s profits would rebound for the second half of 2023, after a year ruled by anxieties over inflation’s impact on the economy. Still, that collective bounce-back, as it has through this year, will hinge on strong results from the world’s biggest tech players.

    Wall Street analysts expect S&P 500 companies to eke out a 0.5% gain in per-share profit growth during the third quarter, according to the FactSet report. If that number holds, it would be the first quarter of earnings growth since the third quarter of last year.

    Those potential gains, however, will largely depend on results from Amazon.com Inc.
    AMZN,
    +0.28%    ,
    Meta Platforms Inc.
    META,
    -0.26%
    and Alphabet Inc.
    GOOG,
    +0.73%

    GOOGL,
    +0.83%
    — outsized companies with outsized influence on markets and S&P 500 company financials overall. Financials for those companies have rebounded this year, after big tech retrenched amid a drop-off in pandemic-related digital demand from people spending more time at home and online.

    This week in earnings

    Three years of supply disruptions have upended the economy and driven prices higher, forcing the Federal Reserve to embark on a delicate effort to bring them lower by discouraging borrowing and spending through a series of interest-rate hikes. But what about the impact on bowling? For answers, we turn to results this week from bowling-alley chain Bowlero Corp.
    BOWL,
    -3.43%    ,
    which saw a jump in demand following the economy’s reopening but now faces questions about that demand as it shows signs of returning to Earth. Convenience-store chain Casey’s General Stores Inc.
    CASY,
    +0.85%
    and homebuilder Lennar Corp.
    LEN,
    +0.50%
    also report.

    The call to put on your calendar

    Adobe results: Digital-media, analytics and design firm Adobe Inc. reports quarterly results on Thursday. But Mizuho analyst Gregg Moskowitz said his focus was on the company’s broader digital transformation.

    He cited stronger Web traffic, the potential for more deals with bigger customers, signs of improving trends in Adobe’s
    ADBE,
    -0.02%
    analytics segment, as well as the segment that includes design tools like Photoshop. But he said the company’s moves in generative AI could be “a significant growth driver.” Adobe this year unveiled Firefly, an AI image and text-enhancement model that can be incorporated into Adobe’s software. Moskowitz said that “while very early, our checks indicate an already high level of large customer interest in GenAI projects, including Firefly for Enterprise.” However, he said the company’s $20 billion acquisition of online design platform Figma was still “a big question mark,” as costs and regulatory scrutiny accumulate.

    The number to watch

    Oracle results, supply situation: Cloud and IT-network developer Oracle Corp.
    ORCL,
    +0.98%
    reports results on Monday. Like much of the tech world, Wall Street sees the company as an AI play. But UBS analysts said that as businesses race to secure the components that power AI, Oracle could have an “underappreciated edge” over rivals.

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  • Sorry, Elon, a ‘super app’ is never going to fly in the U.S.

    Sorry, Elon, a ‘super app’ is never going to fly in the U.S.

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    “Super apps” have never truly existed in the United States, and it is apparent at this point that they never will.

    That isn’t stopping some executives and investment analysts from still dreaming of becoming one-stop shops for their users’ needs, something only a small handful of apps in Asia have managed to do. The most prominent is Elon Musk, the Tesla Inc. TSLAchief executive who purchased Twitter last year and has proclaimed that he will turn it into an “everything app” called X that resembles super apps in China.

    “I…

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  • Is the Stock Market Open Today? These Are the Trading Hours for Labor Day.

    Is the Stock Market Open Today? These Are the Trading Hours for Labor Day.

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    Is the Stock Market Open Today? These Are the Trading Hours for Labor Day.

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  • My not-so-empty nest and the dirty little secret that no one talks about

    My not-so-empty nest and the dirty little secret that no one talks about

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    Ever since my daughters entered high school, I was preparing myself for the dreaded “empty nest.” While it was years away, I worried about how I would adjust to the reality of kids in college and no more time-sucking chores to do.

    Even though I have been a working mother in a two-income household, family always was a priority, and I was devoted to caring for our daughters. So, I did wonder how I would adjust to the hole left in my daily calendar when our girls went off to school, graduated or moved on and launched their own lives.

    But here’s the dirty little secret that no one talks about until it happens. After decades of marriage and three years of COVID quarantine, I’ve got a different problem: I can’t get my husband to leave the house.

    It’s a topic of conversation among my girlfriends, all of us looking for some solitude but instead faced with our husbands, always in their sweatpants, happily hanging out around the house.

    Of course, COVID was the trial run, the big disrupter, for being at home. My husband, pre-COVID, was a human tourism brochure, constantly digging up great activities we could go to. Most of them were things we did together but since we weren’t holed up together at home, it didn’t feel stifling.

    The COVID pivot

    But once COVID hit, all those activities came to a screeching halt and my husband proclaimed that with all the books, CDs and vinyl from his youth along with tchotchkes he’s collected over decades, he could be more than happy to stay home forever and read, listen to music and peruse his collections.

    Maybe I have done such a good job of creating a comfortable nest that my husband just doesn’t feel the need to leave. Perhaps COVID caused him to re-evaluate just how important it was to get some fresh — and possibly contaminated — air.

    Maybe, like so many men his age, he doesn’t have enough friends — Jane Fonda has expounded on that of late, explaining to anyone who will listen how vital her women friends are to her well-being, while all men want to do is sit next to each other and watch sports or cars or women from afar. And she’s right, women have friends that are soul mates, advisers, co-conspirators. Most men haven’t thrown each other that emotional lifeline.

    The timing is unfortunate. I’m working less than full time at this stage of life. Now that I’ve gotten accustomed to my children being gone and look forward to some time to myself, my husband has had to rethink his motivation to get out of the house every day.

    Still working, but from home

    The fact that he continues to work, but now fully from home, hasn’t helped. After stressful workdays I understand that he also needs some downtime.

    Many men are at the stage of life where a decision about whether to retire is also on the table. But here is a word of warning to husbands considering that as their next chapter: Check your Rolodex for friends you want to spend time with because we can’t be your constant companions.

    Maybe it’s a “Men Are from Mars, Women Are from Venus” kind of thing. But after watching all the episodes of “The Sopranos” for the first time recently, I feel that if only there was a Bada Bing club — without the Bada Bing. Maybe someone should start a Daddy Daycare to literally take care of Daddy.

    Guys of a certain age need a place to meet and schmooze, a clubhouse where someone can make them a plate and just create an inviting space to shoot the breeze. I have no idea what they would talk about, though.

    See: ‘It’s just a nice place for an old guy to go, I guess’: Men’s Sheds offer camaraderie and connection

    Women know that building deep friendships has paid huge dividends as we all have gotten older. Long-married spouses need more time with their friends — a respite from too much togetherness at home and an opportunity to discuss something beyond what’s for dinner.

    I did gently mention a few weeks ago to my husband that he rarely leaves the house these days and maybe he could take an outing one afternoon a week that didn’t include me.

    “What do you mean I never leave the house?” he said, incredulous. “I went to Ralph’s just the other day.” And proud hunter-gatherer that he is, we’ve got the boxes and cans of unheard-of sale items we will probably never use to prove it.

    Also see: Am I lonesome? ‘I’m fine. I’m fine.’ How single men can prepare to age alone.

    Growth of gray divorces

    I have found women are often more adventurous, even as we age. We are less willing to just hang back and “relax.” For an increasing number of women, gray divorce has become a term that sociologists are noticing, as more older women have chosen to approach their senior years alone.

    See: Gray divorce can be financially devastating — especially for women

    For others, independent travel is an answer. There are so many blogs, Instagram and Facebook
    META,
    +0.17%
    accounts by women traveling alone that we are practically our own demographic. In my independent solo travels, I have encountered many women who got tired of asking their reluctant husbands to come along and have happily set out on their own.

    Once you arrive in a strange city, it is totally liberating to explore when you don’t have to check in with anyone else about what to do when, how to get wherever, or what time or what to eat each day. And it’s easier to engage in conversations with strangers when you are by yourself. I find I’m more open to those encounters when I’m on my own.

    See: This 82-year-old woman ended up traveling alone in France for three weeks. It turned out pretty great.

    Dolly Parton’s secret

    I heard a story recently from a photographer who was photographing Dolly Parton. The soon-to-be-married photographer asked the performer her secret to her long marriage. Parton’s answer: “Travel a lot. Separately.”

    While it’s important to get away, for me, who never described myself as a homebody, it’s essential to have some alone time that doesn’t involve leaving the house. As we age, the one thing that is certain is that the future is unpredictable.

    There may come a time when leaving the house is not a safe or viable option. While we are healthy and active enough, let’s give each other the space to enjoy one of life’s guilty pleasures — moments of solitude at home where you have a chance to think, regroup, dream and sometimes to just do absolutely nothing.

    The added bonus will be that the time we do spend together will be all the more interesting, with new adventures to hear about.

    Iris Schneider has been a journalist and photographer since the 1970s, starting in New York City while teaching at PS 97 on the Lower East Side. She became a staff photographer at the Los Angeles Times in 1980. Her work can be seen on her website or on Instagram (@schneidereye). 

    This article is reprinted by permission from NextAvenue.org, ©2023 Twin Cities Public Television, Inc. All rights reserved.

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