Stocks Rebound as Investors Pin Hopes on Big Tech Earnings Amid Busy Week
Stocks rebounded on Monday after a $2 trillion selloff, as investors pinned their hopes on big tech companies meeting the high expectations for artificial intelligence during the busiest week of the earnings season.
With about 180 companies in the S&P 500 set to report their results this week, representing over 40% of the index’s market capitalization, the focus is on the “Magnificent Seven” megacaps. These companies are expected to see profits rise nearly 40% from a year ago, according to Bloomberg Intelligence.
The stock market’s recent rout, fueled by geopolitical fears and signals that the Federal Reserve will not be cutting rates anytime soon, has left investors eager for positive news from corporate earnings reports.
“Just beating consensus estimates for earnings won’t be enough,” said Matt Maley at Miller Tabak + Co. “We’re going to have to see much better guidance from Corporate America if the stock market is going to resume its advance.”
Strategists at top Wall Street banks are divided on whether companies can deliver on robust forecasts. While some expect profit growth to improve as the economy strengthens, others warn of challenges like hot inflation, a stronger dollar, and geopolitical tensions.
Despite the uncertainties, nearly two-thirds of respondents in a Bloomberg survey expressed confidence that earnings will give a boost to the US equity benchmark. This optimism is the highest since the poll began asking the question in October 2022.
The S&P 500 and Nasdaq 100 both saw gains on Monday, with big tech stocks like Nvidia Corp. leading the way. Apple Inc. was named a top pick for 2024 by Bank of America Corp. on optimism over its upcoming results.
Hedge funds are also showing renewed interest in global equities, particularly tech stocks, according to Goldman Sachs Group Inc.’s trading desk. New long positions have outpaced short sales, signaling a bullish turn in sentiment.
As the earnings season unfolds, investors will be closely watching how companies perform and what outlooks they provide. The tech sector, in particular, is under scrutiny to deliver on promises related to artificial intelligence, which is seen as crucial for future profits.
While concerns about rising interest rates, inflation, and geopolitical risks persist, the focus this week will be on big tech earnings and key inflation data. These events have the potential to shape the near-term trajectory of the market and determine whether the current stock market correction will deepen or stabilize.
Overall, the market remains optimistic about the economy and corporate profits, but challenges like elevated inflation and interest rates are expected to persist. As investors navigate these uncertainties, the performance of big tech companies and the broader market will be closely watched in the coming days.