Q1 2024 Takeaways: The rise and fall of the Magnificent Seven

As the first quarter of 2024 draws to a close, Yahoo Finance's Head of News Myles Udland joins Market Domination Overtime to recap the market highlights of the past quarter.

The S&P 500 (^GSPC) is closing the quarter at a new record high, marking the best first quarter since 2019. While 2023 saw the Magnificent Seven tech stocks fuel market gains initially, the first quarter of 2024 is ending with only four of those names — Amazon (AMZN), Meta (META), Nvidia (NVDA), and Microsoft (MSFT) — carrying the momentum. Apple (AAPL) continues to struggle, declining for three straight months.

As the gains broaden to other sectors of the market, Energy, Materials, Utilities, and Financials all benefited and were the best-performing sectors for the first quarter.

For more expert insight and the latest market action, click here to watch this full episode of Market Domination Overtime.

Editor's note: This article was written by Angel Smith

Video Transcript

MYLES UDLAND: Yeah, I mean, I think, you know, going through-- I was-- I was following along as Jared was breaking down all of these superlatives really for the market over the last year or this quarter. And I think what's interesting is looking at the S&P on two levels. You can look at the biggest winners this year within the index. And you're seeing a lot of the mega-cap names and notably, that is pushing the S&P to outperform the NASDAQ, which in an AI field trade doesn't exactly feel right.

But that picks up on two parts. One, you've got Apple down 10% this year. Two, you've got Eli Lilly up 34% this year. That company is closing in on trillion dollar market cap, which of course, brings us to the Magnificent Seven really kind of breaking up. It's become the Magnificent Four. Jared, I don't know if you have a view on whether it's three or four. Like, does Amazon get bolted on there? Is it really just Meta, Microsoft, and NVIDIA? But seeing that trade separate out has really been an interesting theme through the first quarter.

JARED BLIKRE: I'm going to take that. I'm going to go in a slightly different direction. Just in terms of the broadening theme here, we've seen materials come alive. We've seen financials come alive. But I just want to let-- I just want to explore how big the AI trade is because we're not just seeing it expressed in NVIDIA, we're talking about infrastructure of the United States.

People that power grids, all kinds-- you know, Roper Technologies. There's just a bunch of smaller names that we don't talk about on a day-to-day basis that have really come alive and have been posting record highs. They might not be the biggest percentage gainers but they are the backbone of this rally. So when we say an AI-led rally, yeah, I would argue it's encompassing a lot bigger percentage of the S&P 500 than people are giving it credit for well.

AKIKO FUJITA: The AI trade's still very much intact. And so you're saying-- we're talking about other names that are sort of coming.

JARED BLIKRE: The AI trade itself is broadened.

MYLES UDLAND: Well, and in looking at-- and so SMCI, Super Micro Computer, best performer in the S&P so far this year, stocks up 250%. But you look at those sectors, energy, materials, utilities, the sixth best performer in the S&P this year, GE. That stock is-- but that's kind of derivative of that play. And of course, that stock is going to see a change next week and how it's going to break apart. So you're going to have different units trading within the index.

But 38% rally for GE this year. And I think it really speaks to the way that the market just-- it just ended, you know, I made the joke in our Slack channel like 10 minutes ago. It just feels like 2021 is meshing with 2022 to get the 2024 market energy.

JARED BLIKRE: And you've got tech.

MYLES UDLAND: Yeah, you've got the [? mean ?] blowoff, plus you've got energy. The only thing lagging-- you know, the only sector in the red is real estate.

JARED BLIKRE: Yeah. Well, thank goodness we just had that Reddit IPO because that just circles whatever, I guess, square that we were trying to complete there. I don't-- I don't have a lot to add to that. I just think it's really impressive just some monthly streaks here. So we have the majors, those are up five straight months. Bitcoin is up seven straight months. And let's not forget, that really came alive last year before that kind of-- I think that started in early October, not even with the October lows but a few weeks before that. XLK, that's tech up six months.

What else? WTI crude, that has been a sleeper story. We haven't seen it explode to the upside. Nevertheless, crude oil up three months. And then some of the mega-cap stuff like Meta up seven months in a row, Amazon up six. But Apple, this says a lot, Apple down three.

AKIKO FUJITA: But going back to your point about the Magnificent Seven becoming the Mag Four now, right? I mean, you could argue that Apple could push higher. If what Dan and I've said about the announcements coming through here, you know, that could be a significant catalyst. Is that ultimately a good thing that we're starting to see this break apart though because that points to just how investors are looking at individual company stories as opposed to it as a group?

MYLES UDLAND: Yeah. I mean, I think that-- I think if you're bullish in-- I mean, I think we can say it feels like a bull market, right? So you're going to have rotations within that context. And you can always say, concentrated leadership is good because people like this theme or broadening leadership is good because now there's multiple themes that are in play.

Ultimately for the market, and I was looking at some stats that went around yesterday, Apple has not been a laggard relative to the market to this extent since 2013. So the more that the Apple story goes along and the more it becomes, I guess, to that question Akiko, an Apple-specific story, yeah, I think the read through if anything on a macro level is it's more positive for the index overall that we can see our largest, most profitable company kind of hit, I don't want to call it a rough spot, but a spot where investors for the first time in a while have questions. Seeing the Market Act well in the context of that is probably all else equal, a positive sign for the market.

- Yeah, it is amazing. I mean, a year ago if I told you that storyline that Apple wouldn't work but the market could, there'd probably be a lot of skepticism.

MYLES UDLAND: Yeah. One thing that's interesting about like the stock, there's something about Apple, like the conversation around the company because we're sitting here surrounded by Apple products, all we use is Apple products, it's like there's never a question--

JARED BLIKRE: This is Microsoft right here.

MYLES UDLAND: Well, maybe Jared is the problem.

[LAUGHTER]

It just feels to me-- I mean, Josh, you've covered the company for a long time. It just felt to me like the product primacy of the company has not been in question for like 15 years. And so the stock story has never really been that interesting because like when it goes down, everyone's like, well, everyone has an Apple and everyone has iPhones. And then when it goes up, it's like, well, of course, it goes up.

They buy back a ton of stock. They pay a nice dividend. No one gets in trouble, to use the portfolio manager phrasing, for buying Apple, for being overweight Apple, for owning a lot of Apple. And these moments, these quarters, these half years when the stock comes into question is always a strange time because I guess, to Akiko's question, it's like, the read through for the market becomes a very challenging to make.

I mean 2019, Apple comes out and says we have a huge problem in China. Stock market went up what, 30% in 2019? It was fine. So it has just-- in a weird way, maybe it's not the macro indicator we think just because it's the biggest company.

AKIKO FUJITA: We'll see, right, in this quarter with the big announcement.

MYLES UDLAND: I mean, it's like the question is, do we care more about what Mark Zuckerberg says in three weeks than Tim Cook? Maybe. Maybe that's where we're at. It matters more--

AKIKO FUJITA: Let's talk about it.

MYLES UDLAND: I guess.

AKIKO FUJITA: Myles following that story.

MYLES UDLAND: If I'm invited, of course. Of course.

AKIKO FUJITA: Myles and Jared, thanks so much.