The S&P 500 closed above 5,000 for the first time on Friday, propelled by strong earnings from mega-cap technology companies. Now investors are focused on whether positive momentum can broaden out beyond the Magnificent Seven components.

Yahoo Finance Markets Reporter Josh Schafer breaks down the details.

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

Video Transcript

- The S&P 500 surging over 5,000 for the first time largely due to significant increases in a few massive tech names. But our stock market gains set to broaden in 2024. Here with the details is Yahoo Finance's Josh Schafer. We have heard this before. We've heard this question before.

JOSH SCHAFER: Yes. Everyone's been talking.

- Are they going to broaden? Do we now.

JOSH SCHAFER: --for months, right?

- Yeah.

JOSH SCHAFER: One thing, though, guys that I did bring with us today is a little bit more evidence that shows why we might broaden. Because I think that's one thing that I know. I've gotten into many conversations with strategists about and I'm sure you guys have too is, OK, so we're going to broaden, well, one of my first questions is always, when are we going to see it in earnings? We have to see it in earnings at some point to prove what we probably see in price reaction and Bank of America was out with an interesting note today.

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Pointing out the difference in Mag Seven earnings expectations versus the other 493 stocks in the S&P 500, and essentially pointing out, you can see here with your purple and blue lines, the purple line is the 493, the non Mag Seven stocks. The light blue line is the Mag Seven stocks. You can see in Q4 right now analyst projections are for the 493 to finally cross the Mag Seven and have higher year-over-year earnings growth.

Now we could probably point to the fact that Mag Seven is going to have tough comps at that point in Q4 as far as your earnings growth goes. But we're seeing that gap really come closer together guys. And I think that's the big takeaway here. And B of A made the point that that might lead to some level of broadening or at least support that to see that. Because remember, we were looking at that one graph with big tech a couple of weeks ago before earnings, and it was just a massive dispersion.

So we're seeing that come away a little bit.

- Yeah. When you talk to strategists, Josh, do they say, OK, well, if this rally is going to continue, it has to broaden?

JOSH SCHAFER: It seems like that at some point. Yes. At some point, strategists argue we would have to see more than basically at this point you could argue. It's for stocks driving us higher. But I think the main thing that most strategists are pointing out is it's probably not going to happen tomorrow and it might not even happen this month, Josh. I think a lot of people are highlighting-- Bank of America specifically highlighting June.