Our rating on the Financial sector is Over-Weight. The Fed's rate-hike campaign is expanding net interest margins for banks. We also look for recovery in fee-based businesses, bond issuance, and M&A as the rate cycle winds down. Still, with inflation running hot, companies may cut back on hiring and investments, and thus on business loans. As of the end of April, the sector accounted for 13% of the S&P 500. The sector was outperforming the market with a gain of 12.0%. It underperformed the market in 2023, with a gain of 7% compared to a gain of 24% for the S&P 500. The sector includes money center banks, regional banks, investment banks and brokerages, exchanges, insurers, and financial data companies. Here are the Financial companies that either are on our Focus List or are used in our model portfolios.

Management's ability to "raise guidance" can often be a catalyst for market-beating returns in the quarters ahead. The first-quarter earnings season has crossed the 90% mark and is wrapping up, with blended earnings (actual results and the consensus for those still to report) showing a year-over-year gain of almost 7%, according to Refinitiv. That is considerably better than the 4%-7% advance expected at the start of the earnings period. Leading the outperformance were strong gains in Communication Services earnings, up 43%, and Consumer Discretionary, up 26%. On the flipside, Healthcare and Energy, both down 24%, are performing the worst. Our analysts are always on the lookout for companies that boost outlooks during earnings season, as this is often a signal for momentum in the months ahead. Here is an initial list of BUY-rated companies in the Argus Fundamental Universe of Coverage at which management raised guidance or increased its outlook during the 1Q24 EPS reporting season.

Moody’s, along with S&P Ratings, is a leading provider of credit ratings on fixed-income securities. The ratings segment, Moody’s Investors Service, includes corporates, structured finance, financial institutions, and public finance ratings. MIS represents a majority of the firm’s profit and about half the firm's revenue. The other segment, Moody’s Analytics, consists of decision solutions, research and insights, and data and information.

Moody’s, along with S&P Ratings, is a leading provider of credit ratings on fixed-income securities. The ratings segment, Moody’s Investors Service, includes corporates, structured finance, financial institutions, and public finance ratings. MIS represents a majority of the firm’s profit and about half the firm's revenue. The other segment, Moody’s Analytics, consists of decision solutions, research and insights, and data and information.