Investors are awaiting the results of major technology companies to assess stock gains

A sharp rise in growth stocks for blue chips and technology stocks has led markets to rebound this year, and earnings reports in the coming weeks may help investors determine whether those gains are justified.
In a survey conducted by the Bank of America Global Research, fund managers said that US technology stocks are currently the most traded in the market, as investors pile their money into large companies, believing that the Federal Reserve will soon stop its tightening monetary policy, and that the sector will remain resilient with a slowdown. the growth.

Big business

The rise in stocks such as Apple, Microsoft and Tesla helped preserve broader indices in the face of recession fears and the banking crisis last month triggered by the collapse of Silicon Valley and Signature banks.
Apple shares rose 27% and Microsoft 19% this year, and together they represent nearly half of the total progress of the Standard & Poor’s index during March, according to the Standard & Poor’s and Dow Jones indices.

The index rose by about 7.5% year-to-date. A continuation of this rally may depend on companies outperforming their already-downgraded first-quarter estimates. Technology earnings are expected to decline by 14.4%.

Communication services companies, including Meta Platforms and Alphabet’s Google, are expected to decline by 12%, according to Refinitiv data.
After sharp declines in 2022, this has been a group that has been unattractive to a number of people, and is now seeing some momentum pick up. And the results of the companies will show whether this is really a safe haven for those who have concerns about recession.

corporate results

Alphabet and Microsoft are expected to announce results on April 25, followed by Apple on May 4.
Amazon, part of the consumer discretionary segment, is expected to report results on April 27.
Tesla shares fell nearly 10%, after missing earnings estimates on April 19.
Companies are likely to use earnings reports over the next several weeks to announce more plans to lay off employees that could boost margins before a recession and make these companies’ stocks more attractive.
In January, Alphabet announced the cut of 12,000 jobs, followed by Amazon in March by cutting 9,000 workers, and other companies that raised the total number of laid-offs to 27,000 in recent months.
The technology sector had a harsh correction last year, bracing for a kind of recession by cutting headcount and cutting spending a bit.
However, signs of improved profitability could boost another step higher, as Nvidia shares have risen more than 90% this year.
However, the gains may fade if the Fed does not cut interest rates this year, as was widely expected.
While the central bank predicted that borrowing costs would remain near current levels through the end of the year, investors expect interest rates to be cut after the summer.
The effect of interest rates
Higher interest rates are likely to have a strong impact on valuations of the technology sector, which have risen since the beginning of the year; Growth stocks are particularly vulnerable to higher borrowing costs that threaten to undermine the value of their cash flows in the long term.
Apple stock is trading with a forward price-to-earnings ratio of 26.5, while Microsoft is trading at 27.4, compared to 18 on the S&P 500.
There is a very large multiplier in an environment of rising interest rates, because the market is betting that the Fed will reverse its policies, but some experts believe that it is a wrong assumption because the “risk-reward ratio is not in favor of the investor.”

The most important economic events of the week:

Monday 24 April
unscheduled
Tuesday 25 April
9:00 am Case Shiller House Price Index – Standard & Poor’s Index, February
10:00 a.m. New home sales, March
10:00 AM Consumer Confidence, April

Results: Alphabet, Microsoft

Wednesday 26th April
8:30 a.m. Durable Goods Orders, March
8:30 am US trade balance advanced, March
8:30 a.m. Advanced Wholesale Stocks, March

Results: meta platforms

Thursday 27 April
8:30 a.m. GDP for the first quarter
8:30 a.m. Initial jobless claims, April 22
8:30 a.m. Continued Claims for Relief, April 15
10:00 a.m. Pending home sales, March

Results: Amazon

Friday 28 April
8:30 am Labor cost index / first quarter
8:30 a.m. Personal spending (nominal), March
8:30 am Personal consumption expenditures price index, March
8:30 a.m. Personal consumption expenditures (YoY), March
10:00 a.m. Consumer opinion (final) April