Tech giants’ earnings may be another test for markets at new highs -Breaking
By Lewis Krauskopf
NEW YORK (Reuters) – Investors are homing in on a flood of earnings reports from Wall Street’s tech and Internet giants, as the high-growth stocks that have led markets higher for years face pressures from regulation, supply-chain snags and rising Treasury yields.
Apple Inc (NASDAQ:), Microsoft Corp (NASDAQ), Google parent Alphabet NASDAQ (NASDAQ) Inc. Amazon.com Inc NASDAQ: Facebook Inc (NASDAQ) All of the above companies are set to announce earnings next week. Together, these five stocks account for 22% of weighting in the, which gives them huge influence over the wider index.
Overall, companies representing 46% of the S&P 500’s market value are due to post quarterly results next week, according to Goldman Sachs (NYSE:).
Strong earnings reports have helped lift the S&P 500 to fresh record highs, with the benchmark index rising 5.5% so far in October. The index saw its largest monthly percentage decline since March 2020, when the pandemic started.
Investors expect large technology companies to report strong profits. However, they also want to know if the growth will continue. Forecasts about supply shortages such as that which has affected large swathes of global industries will also be on the agenda.
Some signs have been seen that tech companies might have some challenges ahead of them. Intel (NASDAQ: IBM The stock fell sharply following their report disappointment this week.
Facebook shares fell by 5% Friday afternoon Snap Inc Snapchat’s owner, (NYSE:), stated that Apple privacy restrictions on iOS devices had hampered Snapchat’s ability to measure and target its digital advertising.
James Ragan (director of wealth management research, D.A.) stated that “I would anticipate the potential for greater volatility.” Davidson. “We might be able to get some big companies disappointed a little.”
Megacap company quarterly reports next week https://graphics.reuters.com/USA-STOCKS/TECH/klpykzlgypg/chart.png
Sectors that have shown the most vulnerability to changes in the economy have led market gains, with financials and energy gaining 11% and 8 respectively. The S&P 500 technology sector is up 6% month-to-date.
In the aftermath of the pandemic many tech-focused businesses saw a surge in sales. This was due to a change in consumer behaviour, economic lockdowns, and the shift towards working remotely.
“The question then becomes, can they keep it up?” said Sameer Samana, senior global market strategist at Wells Fargo Investment Institute. How do growth rates compare for large technology companies?”
BofA Global Research found that technology is slightly less important to fund managers than the average position over the last 20 years. At the same time, they named “long tech” as the market’s most crowded trade for the fourth straight month.
Apple will likely be discussing supply chain issues, such as the shortage of semiconductors. Amazon might offer insight on how logistics issues could impact holiday shopping seasons.
“If … Apple says, ‘Yeah, we would have sold a lot more phones except for the chip shortage,’ you think it’s really severe then because they are probably first in line to get chips from everybody,” said Peter Tuz, president of Chase Investment Counsel.
The possibility of U.S. regulatory intervention is also a concern for these giant companies. Therefore, investors should be on the lookout for information.
A number of technology giants were asked by the U.S. consumer regulator this week about their use and collection of consumer payment information.
Technology and other growth share may be at risk from a sustained increase in Treasury yields. These rates move in the opposite direction to bond prices. The future cash flows are less important than the company’s valuation, so they can be more heavily discounted in standard models. In the last month, the yield on the 10-year Treasury Note has increased by 35 basis points to 1.644%.
“It hasn’t been all good news on the earnings front,” wrote Art Hogan, chief market strategist at National Securities. The good news is winning the battle against the negative, but there’s still a long road ahead of us.