Default risk for the S&P 500 ticked slightly higher approaching the end of the second quarter from the first three months of the year as stock markets have rallied and first-quarter corporate earnings broadly fell year over year.

The median probability of default for S&P 500 companies was 3.91% as of June 28, up from 3.84% on March 31, according to S&P Global Market Intelligence's Risk Gauge model. The scores represent the median odds of default on debt within a year, based on financial reports and the volatility of share prices for public companies in the index, accounting for country- and industry-related risks and other macroeconomic factors.

Since March 31, the S&P 500 is up about 8% as the US economy has so far averted recession and the job market has yet to feel the effects of the Federal Reserve's aggressive push to raise interest rates.

The information technology, industrials, utilities and materials sectors all registered an increase in median probability of default scores at the end of June from March 31. The S&P 500 Utilities and Materials sector indexes have lagged the broader S&P 500 since March 31, with materials stocks up 0.54% and utilities stocks down 4.38%.

Median default risk was flat or fell in other sectors, including financials, where banking turmoil in early 2023 contributed to an overall uptick in the probability of default scores from a year earlier.

Q1 2023 earnings by sector

Corporate earnings, meanwhile, have broadly fallen. S&P 500 companies reported a combined 1.2% drop in first-quarter EPS compared to the prior year, with seven of the index's 11 sectors logging declines.

Real estate fared worst among sectors, with a 22.4% drop in quarterly EPS. The sector has dealt with declining office occupancy rates as many workers continue to do their jobs remotely and hotel occupancy that lags pre-pandemic levels.

The consumer discretionary sector, meanwhile, showed the best result, improving quarterly EPS by 36.2% over the prior year. Several companies in the sector — including Amazon.com Inc., Chipotle Mexican Grill Inc. and Ford Motor Co. — reported earnings growth year over year during the quarter.