Broad indexes would suffer in 2025 if tech falters, but average stock hold up, Capital Economics says
Broad stock market indexes would suffer in 2025 if Big Tech leaders continue to falter but the average stock is likely to “hold up well,” according to Capital Economics senior markets economist James Reilly.
Although the S&P 500 Information Technology Index slid 5.5% Monday, its largest one-day decline since 2020, “the losses were largely confined to firms that had been expected to play a key role in facilitating AI, including semiconductor firms and utilities firms powering data centers,” London-based Capital Economics said, noting the S&P 500 only fell 1.5% and roughly 70% of companies in the index rose.
One possibility is that investors will start to favor more of the users of artificial intelligence and fewer of the “enablers,” which may have already begun before Monday, Reilly wrote. “In this scenario, the S&P 500 could rally further even as sentiment towards these prior favorites cooled. Indeed, something similar happened during the dotcom bubble — there was a rotation within the I.T. sector (from the largest firms) around 1999/2000 that didn’t undermine the S&P 500 index.”
Strangely, the large share of the market accounted for by the 10 biggest stocks offers some hope. “That might mean that the losses as these gains unwound would be similarly concentrated, affording plenty of scope for the average firm in the S&P 500 to do well if the economic backdrop stayed positive, as we expect,” Reilly noted.
— Scott Schnipper
Stocks making the biggest moves after hours
Check out some of the companies making headlines in extended trading:
- Starbucks — The coffee chain gained more than 2% after better-than-expected quarterly results. Starbucks notched fiscal first-quarter earnings of 69 cents per share on revenue of $9.40 billion, while analysts polled by LSEG were looking for 67 cents in earnings per share and $9.31 billion in revenue. Same-store sales declined for the fourth consecutive quarter, however.
- F5 — The application security company surged 12% after the firm issued a better-than-expected revenue outlook for the second quarter. F5 forecasts revenue in the current quarter to be in the range between $705 million and $725 million, while analysts polled by FactSet were expecting $702.7 million.
- Qorvo — The semiconductor company gained 12% on the heels of an upbeat fourth-quarter outlook. Qorvo expects revenue in the current quarter of $850 million, compared to a forecast of $841 million from analysts polled by LSEG. The company’s adjusted earnings per share forecast of $1 was also above estimates that called for 86 cents per share.
Read the full list here.
— Brian Evans
Stock futures open lower
Stock futures were marginally lower on Tuesday as investors look toward the first Federal Reserve interest rate decision of 2025.
Futures tied to the Dow Jones Industrial Average ticked down 23 points, or 0.05%. Nasdaq 100 futures pulled back 0.1% alongside S&P 500 futures.
— Brian Evans
