Last week all eyes were on large cap tech earnings. They delivered a mixed bag… but on the whole ‘better than feared’. Q1 earnings didn’t fall off a cliff. Single digit growth (top and bottom line) was largely cheered – which highlights how low expectations were. Next week eyes turn to the Fed. The market has priced in a 25 bps hike for May – but will it be a ‘dovish’ hike – where they offer language to suggest a pause in June? Or will they say “there’s more work to do”?
Winners & Losers Post Big Tech Earnings
What did we learn from big-tech earnings this week? In short, their earnings were “better than feared”. However, they were far from stellar. The ‘best of the best’ could only muster single digit growth (Google was negative). The Search giant also disappointed on expense management. Amazon offered very soft guidance – with AWS growth expected to fall to deliver only 11% growth next quarter. That’s a long way from its 40% growth a year ago. In summary, the challenges are not over for the sector – however investors are paying lofty premiums.
Big Tech on Deck
More than 25% of the total S&P 500 market capitalization rests with just 5 companies. And those 5 stocks are all in tech. This week we hear from 4 of those 5. The bar has been set extremely low – therefore it won’t be too hard for these companies to exceed expectations. But don’t expect earnings and revenues to be stellar. If anything – expect single digit growth from these names. However, the market will take that.
Market Has Bad Breadth
The S&P 500 is up about 3% to start the first quarter of 2023. On the surface things look good. But what if we look ‘under the hood’. Most sectors are lower – especially those which are economically sensitive (like banks, energy, small caps and materials). However, big tech is carrying the market higher. That’s not necessarily a good sign.
For a full list of posts from 2017…