Tech giants earnings could be another test for markets at new highs By Reuters – News Couple

Tech giants earnings could be another test for markets at new highs By Reuters

© Reuters. FILE PHOTO: People are seen on Wall Street outside the New York Stock Exchange (NYSE) in New York City, US, March 19, 2021. REUTERS/Brendan McDermid/File Photo

By Louis Krauskoff

NEW YORK (Reuters) – Investors are turning to a torrent of earnings reports from Wall Street’s tech and internet giants, as high-growth stocks that have driven markets upward for years face pressure from regulations, supply chain hurdles and rising Treasury yields. .

Apple Inc. (NASDAQ :), Microsoft Corporation (NASDAQ :), Google’s Alphabet (NASDAQ) company, Inc (NASDAQ :), and Facebook Inc (NASDAQ 🙂 ready to report earnings next week. Collectively, these five names account for more than 22% of the weighting in the index, giving the movements of their shares a huge impact on the broader index.

Overall, companies that represent 46% of the S&P 500’s market capitalization are due to report quarterly results next week, according to Goldman Sachs (NYSE:).

Strong earnings reports helped lift the S&P 500 index to new highs, with the benchmark index up 5.5% so far in October. In September, the index recorded the largest monthly percentage decline since the pandemic began in March 2020.

While investors are expecting most of the big tech companies to show solid earnings, many will also be listening for indications of whether they will be able to sustain this growth. Also in focus will be any predictions about supply bottlenecks, such as chip shortages affecting a wide range of global industries, as well as their views on the sustainability of the recent rise in consumer prices.

There was already some indication that tech companies might have high limitations to articulate. Intel (NASDAQ 🙂 and IBM (NYSE:) fell sharply after their disappointing reports this week.

Meanwhile, Facebook shares fell 5% on Friday after that Snap Inc (NYSE :), owner of the photo messaging app Snapchat, said the privacy changes Apple is implementing on iOS devices are hurting its ability to target and measure its digital ads.

“I anticipate the potential for more volatility,” said James Ragan, director of wealth management research at DA Davidson. “We might get the chance that some of these big companies will disappoint a little bit.”

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Market gains this month were led by sectors seen as particularly sensitive to the fluctuations of the economy, including energy and the financial sector, which rose 11% and 8%, respectively. The S&P 500 tech sector is up 6% month-to-date.

Many tech-focused companies have received a boost in the wake of the pandemic, amid a shift in consumer behavior amid the economic shutdown and the transition to working from home.

“The question then becomes, can they keep up with that?” Samir Samana, chief global market strategist at Wells Fargo (NYSE: Institute for Investment. “What Do Growth Rates Look Like for Big Tech?”)

A survey conducted by Bank of America Global Research earlier this month showed that fund managers underweight technology slightly compared to their average position over the past 20 years. At the same time, they called “Long tech” the busiest trade in the market for the fourth consecutive month.

Supply chain issues, including semiconductor shortages, are sure to be a topic for iPhone maker Apple, while Amazon may open a window into how the holiday shopping season is affected by logistical hurdles.

“If Apple said, ‘Yeah, we were going to sell a lot of phones except for the lack of chips,’ you think it’s really dangerous because they’re probably the first to get chips from everyone,” Peter Toze said. Chairman Chase Investment Board.

The possibility of regulatory intervention by the US government, also hangs over these giants, so investors will be wary of any idea.

This week, the US consumer watchdog said it has requested information from a number of tech giants about how they collect and use consumer payments data.

The continued rise in Treasury yields, which moves inversely with bond prices, may also pose a long-term threat to technology and other growth stocks. Valuations of these companies depend more on future cash flows, which are discounted more steeply in standard models when returns are high. The yield on the 10-year Treasury rose about 35 basis points in the last month to 1.64%.

“Not all the news has been good in terms of earnings,” wrote Art Hogan, chief market strategist at National Securities. “So far, the good news has triumphed in a tug-of-war against the bad, but we have a long and potentially bumpy road ahead.”

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