Ahead of the first quarter earnings season, energy (NYSERCA:XLE), technology (NYSERCA:XLK) and communication services (NYSERCA:XLC) S&P 500 sectors have been rated highest by Looking Alpha's Quant system.
The Quant Ratings system grants ratings based on quantitative criteria. measures, such as valuation, earnings growth, and recent stock performance. The highest possible score for any individual company is a 5.
The Energy Select Sector SPDR ETF (XLE) took first place with a Buy rating and a score of 4.45, followed by the technology sector (XLK) with 4.43 and communication services (XLC) with 4.27 , also rated as Buy.
The energy sector has seen impressive performance so far this year, recording a 15.7% gain, while the energy index (SP500-1010) rose 16.4%. This growth has been supported by the Federal Reserve easing rates, an improvement in Chinese demand and the prospects of ai helping with energy demand.
Kinder Morgan (KMI) took first place with a score of 4.28 out of 5 in the energy sector, while Diamondback Energy (FANG) took second place with a score of 4.26, both helped by strong trends in the demand observed in recent quarters. results.
The technology sector (XLE) came in second with growth of around 7% in the first quarter, helped by semiconductors and the semiconductor equipment industry, as well as structural drivers such as artificial intelligence. Super Micro Computer (SMCI) and Oracle (ORCL) scored the highest in this sector, with a respective Quant Score of 4.99 and 4.87.
Other sector ETFs, including the Materials Select Sector SPDR Fund ETF (XLB), the Financial Select Sector SPDR Fund ETF (XLF), and the Industrial Select Sector SPDR Fund ETF (XLI), also received a Buy rating, with scores of 3 .90, 4.15 and 4.18 in SA. Quantitative system.
Worst ranked sectors
Real estate (NYSERCA:XLRE) and basic consumer products (NYSERCA:XLP), with a score of 1.74 and 2.86, respectively, were at the bottom of the S&P 500 sector list at the end of the first quarter. The former was the only sector in the index with a Sell rating under SA's Quant system.
The SPDR Real Estate Select Sector Fund ETF (XLRE) fell around 6% in the first quarter, as markets priced in lower hopes for a near-term rate cut. Citi Research analysts believe the fundamental setup will continue to face challenges in 2024. Boston Properties (BXP), Kimco Realty (KIM), and Equinix (EQIX) have been notable S&P 500 laggards.
The performance of consumer discretionary (XLY) has been affected by housing construction and automotive, which continued to struggle in the first quarter. Those who fell the most in this sector in the first quarter were Tesla (TSLA) -33%Lululemon Athletica (LULU) -23%VF Corp (VFC) -18%Etsy (ETSY) -sixteen%and Nike (NKE) -13%.
Views on S&P 500 First Quarter Earnings:
The first quarter earnings season began today, with several major banks reporting their latest quarterly performance. BlackRock (BLK), Wells Fargo (WFC), Citigroup (C), and JPMorgan Chase (JPM) posted better-than-expected quarterly earnings.
The financial sector is expected to post the sixth-highest (year-on-year) earnings growth rate of the eleven sectors for the first quarter, at 0.7%, according to data set.
Goldman Sachs is positive on labor market data ahead of earnings season, but flagged concern as S&P 500 companies forecast year-over-year growth in both sales and EPS of just +3% given a flat margin outlook. Weak reports from several retail stocks have also raised questions about the state of the American consumer.
Overall, the bank expects communication services (22%), information technology (21%), consumer discretionary (14%) and utilities (+23%) to post strong growth in the first quarter. Energy (-27%) and Materials (-24%) will suffer the largest declines.
