Technology is officially “oversold” per the technical barometers that track market breadth, stochastics, etc. etc.
Tech being oversold is not a bad thing and was probably sorely needed after the run the tech sector, mega-cap 7 and the top market-cap weight names saw in the first half of 2024.
Here’s a quick rundown by sector showing the changes to SP 500 revenue and EPS growth rates for Q3 ’24:
Revenue growth rates expected for Q3 ’24:
- Consumer Disc: Expected +4.5% rev growth for the sector as of 9/20/24, with the same +4.6% as of 8/16/24;
- Consumer Staples: +1.4% as of 9/20//24, versus +1.6% as of 8/16/24;
- Energy: -3.9% as of 9/20/24, versus -2.6% as of 8/16/24;
- Financials: +3.4% as of 9/20/24, versus the same expected rate on 8/16/24;
- HealthCare: +6.9% of 9/20/24, versus +6.8% as of 8/16/24;
- Industrials: -0.2% as of 9/20/24 versus 0.4% as of 8/16/24;
- Basic Materials: +0.7% as of 9/20/24, versus +1.2% as of 8/16/24;
- Real Estate: +6.2% as of 9/20/24, versus +6.5% of 8/16/24;
- Technology: +11.6% as of 9/20/24, versus +11.3% as of 8/16/24;
- Communication Services: +6.9% as of 9/20/24, versus 7% as of 8/15/24;
- Utilities: +5.5% as of 9/20/24 versus 5.6% as of 8/16/24;
- SP 500: +4.1% as of 9/20/24, versus 4.2% as of 8/16/24;
EPS growth rates expected for Q3 ’24:
- Consumer Disc: +1.8% as of 9/20/24, versus +2.1% as of 8/16/24;
- Consumer Staples: +1.5% as of 9/20/24, vs +2.6% as of 8/16;
- Energy: -18.8% expected as of 9/20, vs -13.6% as of 8/16;
- Financials: +2.2% as of 9/20. vs +1.9% as of 8/16;
- HealthCare: +11.2% as of 19/20, vs +11.5% as of 8/16;
- Industrials: +2.1% as of 9/20, vs +3.8% as of 8/16;
- Basic Materials: -2.2% as of 9/20. vs 0% as of 8/16;
- Real estate: +2.8% as of 9/20 vs +3% as of 8/16;
- Technology: +15.5 as of 92/0, vs +14.4% as of 8/16;
- Communication Serv: +12.4% as of 9/20, vs +12.3% as of 8/16;
- Utilities: +5.7% as of 9/20, vs +5.2% as of 8/16;
- SP 500: +5.4% as of 9/20, vs +5.8% as of 8/16:
Summary / conclusion: Technology is 31% of the market cap of the SP 500 as of 9/20/24, so tech matters. Note how for both technology revenue and for technology EPS, the growth rates improved or were revised positively the last 6 weeks, versus the rest of the SP 500 sectors.
Now that technology is oversold, this revision data becomes a tad more important.
Micron’s results Wednesday night, September 25th, after the market close, probably matter more given Micron’s importance to the semiconductor sector, and given the semi sectors importance to the technology rally after the October ’22 low (mainly AI-related), but readers get the point.
Another way to look at this is: for Q2 ’24, here’s the progression of technology sector growth as demonstrated by Q2 ’24 earnings growth:
- June 30 ’24: +16.9% expected
- Aug 16 ’24: +19.5% expected
- Sept 20 ’24: +21.4% expected
By “expected” what’s meant is the final growth rate for Q2 ’24 for the tech sector.
In Q3 ’24, given today’s current numbers technology might see growth slow sequentially since current estimates are for +15% growth for the tech sector for Q3 ’24, but 16.9% was expected at the start of Q2 ’24, and depending on what Micron holds, Q2 ’24 could finish at 21.4% or better.
The big impact from 8/16/24 through 9/20 on Q2 ’24’s results, was likely Nvidia in late August and then Oracle’s report in mid-September ’24.
Micron is next.
For Q3 ’24, the SP 500 EPS and revenue estimates still showing no signs of stress.
None of this is advice or a recommendation, but only an opinion. Past performance is no guarantee of future results. For all EPS and revenue growth rates cited, the source of the data is LSEG. Investing can involve the loss of principal, even for short periods of time.
Thanks for reading.