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Selloff Analysis: Mag 7 Hits Hardest as Market Corrects

Stock Market Selloff Flags Concerns. The Mag 7 has suffered the most amid broader market corrections as earnings slightly rise while consumer uncertainty lingers, raising questions about future valuations.

Date: 
AI Rating:   6
Selloff Overview

The analysis indicates that the recent stock market selloff primarily stemmed from falling PE multiples, especially among the Mag 7, which saw a sharp decline of 15%. While valuations were historically high prior to this event, the actual earnings remained steady or slightly up across large and mid caps, suggesting the selloff is more a product of market correction than fundamental weaknesses.

Earnings Per Share (EPS) and Forward Earnings

The report indicates that the forward earnings of large and mid caps have increased slightly since the market's peak, which is a positive signal given the price drop. However, small caps have experienced a downturn in earnings, which could indicate differing performance across sectors. Therefore, the sentiment surrounding EPS remains mixed.

Market Valuations

It was noted that despite the increase in forward earnings, lower valuations are due to a general reluctance among investors to maintain high premiums for future earnings, leading to the market selling off.

Future Outlook

Some analysts suggest that with current earnings holding up, the worst of the correction may have passed. This is supported by the recent gains of +5% in the Nasdaq-100 and +4% in the S&P 500 from their recent lows, hinting towards a potential stabilization.

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