The S&P 500 Index is the go-to benchmark for stock investors – from fund managers to individuals.
And you’d think with the 500 number that the index would provide a lot of breadth – but that’s not so much the case.
Today, I’m going to discuss how five big stocks are driving the index. With their earnings on tap, they may well work to propel the overall stock market.
This will provide a leg up for the stocks that you and I really care about this week – the surge stocks on our Watch List.
And if you haven’t seen my latest Stealth Trades Watch List, I encourage you to check it out right here.
My Stealth Trades system continues to find impressive even more companies that are going unnoticed on Wall Street.
S&P 500 Is More & Less
The S&P 500 Index is actually made up of 505 stocks. But don’t let that confuse you.
Fewer of those 505 stocks really matter when it comes to moving and pricing the index that you see reported throughout each trading day.
Specifically, as of this writing, information technology companies make up the single-largest weighting of the index at 27.9%.
That means that big tech companies have an outlier of an impact on the pricing of the index and the daily ups and downs.
But it gets even more specific inside that technology space for the index.
The Big Five
Apple (AAPL), Microsoft (MSFT), Amazon (AMZN), Alphabet (GOOGL) and Facebook (FB)…
These are the five largest publicly traded stocks in the country.
They have a combined market cap of $9.5 TRILLION. And all five are scheduled to report earnings this week.
Personally, I don’t trade mega-cap names like this much. But this week I will be paying close attention.
Because this small handful of stocks has an enormous impact on the overall markets.
Since the indexes are market-cap weighted (bigger companies have a bigger impact), these five represent 23% of the S&P 500.
That’s right… Nearly a quarter of what happens to the entire index is determined by these five names.
But small stocks can still buck the trend.
I’ve made money when the indexes were down and lost when they were up.
But I prefer to trade with the wind at my back… To take the path of least resistance.
So, if the Big 5 all post good numbers, there’s a good chance their stocks will rise, and the rest of the market will follow suit.
Apple, Alphabet and Microsoft all report earnings this afternoon.
Facebook will announce on Wednesday and Amazon on Thursday.
Here is the full schedule:
- Apple (AAPL): July 27 @ 4:30 p.m. ET
- Alphabet (GOOGL): July 27 @ 4:15 p.m. ET
- Microsoft (MSFT): July 27 @ 4:05 p.m. ET
- Facebook (FB): July 28 @ 4:05 p.m. ET
- Amazon (AMZN): July 29 @ 4:00 p.m. ET
Apple is expected to present more sales of its core phones and will make the case that it is indeed growing its revenues.
Facebook is expected to present its argument that its advertising sales are on the ascent for more revenue gains.
Amazon should be able to report rising revenue from its various business units, and it should be able to demonstrate an improvement in profits to go along with the revenue.
Alphabet, like for Facebook, should also be able to present rising advertising revenue as well as other business unit gains.
And the leader of technology, Microsoft, should show further gains from its Azure cloud services as well as its software subscription and other recurring revenue sources.
All in all, these five stocks should fulfill the ongoing expectations for a surge in sales and earnings for the overall S&P 500 Index.
So far for the 122 S&P 500 Index members that have reported this season, the average sales growth for the quarter is 17.8% with the average earnings growth at 116.7%.
These are very big numbers. And they are big because they are based on the same quarter from last year as the US and global economies were in lockdown.
The key takeaways for the S&P 500 Index to move higher on earnings reports will be guidance for the coming quarters.
This is where you should be focusing your attention when you’re reviewing the quarterly reports from the Big 5 and the rest of the companies in the market.
That’s All Good, But…
Regardless of what happens to the Big 5, I will continue to trade the setups I see.
Smaller stocks are less correlated.
Names like Alpha Metallurgical Resources (AMR) can make huge moves no matter what happens to Google.
AMR is up 591% over the last 12 months.
And if it makes new highs above $27, we could see another big surge.
So, keep it on your radar.
The same goes for the other stocks currently on our Watch List…
One Last Thing
This past Friday, I alerted subscribers of my Stealth Trades research service to five new stocks that made my Watch List.
These include some interesting stocks that are performing under the radar of the general stock market.
My stealth system continues to find impressive companies that are not getting the needed attention just yet by Wall Street.
This means some great opportunities to buy just before others are catching on to the big drivers for profits that I see as very much underway.
The new Watch List is filled with great stocks, so I encourage you to click here now to get the full rundown on Stealth Trades.