The Return of the Magnificent Seven
The Magnificent Seven was a movie from 1960 about seven gunslingers who were recruited to protect a small town in Mexico. The term Magnificent Seven has been applied to the top 7 technology related stocks (Apple#, Alphabet#, Microsoft#, etc.) that have accounted for about a third of the weight of the S&P 500 Index. The Magnificent Seven have also driven stock market returns for several years as these technology companies generated significant earnings growth. These stocks took a tumble early this year, however, on concerns over the massive spending on data centers and AI infrastructure eating into formerly prodigious cash flow. AI also threatens to disrupt areas of their businesses. The Magnificent Seven stocks as a group declined about 11% in the first quarter alone, dragging down the major indices such as the Nasdaq 100 and S&P 500. Only three of the original gunslingers made it to the end of the 1960 movie, and some of the Magnificent 7 stocks have struggled to rebound.
The Magnificent Seven, The Sequel
What may not be as well know is that there was a sequel made to the original 1960 movie called The Return of the Magnificent Seven, which was released in 1966. Four new warriors were recruited to round out the pack of seven. In the short run, we have also witnessed a return of the Magnificent Seven stocks, but not all have returned to positive territory. Microsoft’s stock is still down about 17% but had been down as much as 25%. Amazon’s# stock had dropped 12% in the first quarter, but has regained ground and is now up about 10% for the year. Meta# tumbled 19%, but is up 2% as of yesterday. Alphabet’s stock declined 13% this year after gaining 65% last year, and has now gained 5% year to date. Tesla’s# stock is still down about 17% and Apple’s stock had declined 9% earlier this year, but is now down about 4%. Other stocks, such as Broadcom’s#, have been recruited to the Mag 7 gang, gaining 10% so far in 2026. As a result, the S&P 500 Index, which had been down 8% at one point, has now fought back valiantly to a 1.8% gain, erasing losses since the Middle East conflict began.
PPI Starting To Smolder, But Less Than Expected
The producer price index (PPI) for March came in well below expectations this week, providing some breathing room for markets. The PPI, a gauge of input costs for goods and services, increased a seasonally adjusted 0.5% for March, well below the consensus estimate for a 1.1% increase in costs. Excluding food and energy, “core” PPI was up just 0.1% against the forecast for 0.5%. On an annual basis, the “all-items” PPI accelerated 4%, the biggest 12-month gain since February 2023. Core PPI posted a 3.8% annual gain. As expected, energy was the primary reason for the increase. The gasoline index surged 15.7%, accounting for about half of the gain in PPI, according to the Bureau of Labor Statistics. Diesel fuel prices alone soared 42% while jet fuel was up 30.7%. As a result, goods prices increased 1.6%, though that was offset by flat services costs, which Federal Reserve officials view as a key gauge which excludes tariff and war impacts. On the plus side, oil prices pulled back yesterday amid hopes that the U.S. and Iran can rekindle negotiations. Brent crude oil futures fell 4.6% to $95 per barrel while West Texas Intermediate crude tumbled 7.9% to $91 per barrel.
Take That To The Bank
Earnings will be a key area of focus when it comes to propping up the market in the face of current elevated geopolitical uncertainty. In latest bank results and earnings call commentary for the first quarter, executives highlighted ongoing resilient consumer spending. JP Morgan# said consumer spending growth was faster year over year due to a strong labor market and higher tax refunds. Citigroup# saw a 5% increase in US consumer card spending, and said delinquencies are in line with expectations. However, Wells Fargo# said its consumer base is increasingly bifurcated, with lower-income households pinched by higher interest rates and energy prices. Bank of America# also noted healthy consumer trends this morning, but with a note of caution. While several Magnificent Seven stocks have rebounded recently, concerns over excessive spending on AI infrastructure buildout and consequent depletion of free cash flow augur a rocky ride ahead. That is until the monetization of massive investment becomes more evident. In the meantime, the Magnificent Seven sequel of stocks is bringing the receipts and aiding overall market returns.
Actress Sarah Michele Gellar turns 50 today, Emma Watson turns 36, Adrien Brody turns 54, and Seth Rogan turns 44. Also, apparently Leonardo DaVinci was born on this day in 1452.
Christopher Crooks, CFA®, CFP® 610-260-2219