Quick Bites | Tech Earnings to Drive Q2 Reporting Season

Since US investors have become more optimistic about the likelihood of multiple interest rate cuts this year, a shift has been underway within the stock market, termed “the big rotation”.‌ However, the recent tech selloff move is not unusual and shows normal correction behaviour so far.

This week will therefore be even more important for the trajectory of earnings growth for the broader S&P 500 with approximately more than one-third of the index reporting earnings including Microsoft, Apple, Amazon, and Meta. Four companies — Alphabet, Nvidia, Meta, and Amazon — are expected to grow earnings by 56.4% compared to the same period a year prior, according to FactSet. The other 496 are expected to grow earnings by just 5.7%.

‌When combining the two groups, the S&P is currently on pace to produce year-over-year earnings growth of 9.7%, as previously noted. 

If big tech earnings can exceed expectations, this will help drive the earnings season to a double-digit gain, which might be just the thing to help this bull market take the next leg higher. On the other hand, if tech earnings disappoint materially, the market could be vulnerable to reassessment, coming at a time when valuations are expensive.

Source: Yahoo Finance