Earnings season to test hopes for broader stocks rally

NEW YORK - Hopes that the U.S. stocks rally will broaden beyond megacaps like Nvidia will be tested in coming weeks as investors learn whether profit growth from other companies is starting to catch up with that of the tech-related leaders.

More companies are projected to post improved earnings as many investors expect the economy to navigate a soft landing, which could boost stocks trading at more moderate valuations than market leaders. That gap is expected to shrink, with forecasts for Magnificent 7 year-on-year earnings rising 29.7% in the second quarter and earnings among the rest of the index up 7.2%, according to LSEG.

"We anticipate that we're going to have nearly all sectors of the S&P participating in earnings growth in 2024," said Katie Nixon, chief investment officer for Northern Trust Wealth Management.

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