Weekly Market Wrap: Will Tech Stocks Live Up to Earnings Expectations?

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Market Recap & Upcoming Week

Last week was marked by significant financial and technological achievements with tech giants Google and Microsoft posting impressive earnings. Both companies showcased enhanced revenue growth and profitability for the quarter ending in June. A highlight was the resurgence of Google’s main advertising business after two quarters of decline, and Microsoft’s cloud and enterprise software sectors exceeded Wall Street expectations despite a global slowdown in tech spending.

Additionally, the duo’s commitment to generative AI technology was noteworthy. With Microsoft’s proactive adoption of this technology, its stock experienced a 46% surge since the start of the year. Google-parent Alphabet, meanwhile, saw a moderate 39% stock increase this year, further boosted by a 6% jump after their recent earnings report.

Meanwhile, on the stock market front, the Dow Jones Industrial Average reached a record with its 12th consecutive day of gains, significantly assisted by a surge in 3M shares. Despite 3M reporting a quarterly loss due to a litigation settlement, the company’s shares rose 5.3% after it announced improved margins and an increase in its yearly earnings expectations.

The U.S. Federal Reserve also raised interest rates by 0.25% in response to ongoing inflation, marking the highest policy rate in 16 years. Internationally, rumors of a possible shift in Japan’s longstanding bond yield repression policy caused minor upheaval in U.S. markets, triggering a rise in Treasury yields and a reversal rally in the S&P 500. This speculation, if confirmed, could signal a more restrictive policy stance in Japan, potentially disrupting international trades tied to Japanese markets.

As the earnings season carries on, the market eagerly anticipates reports from tech giants such as Apple and Amazon. These high-profile companies’ financial results will need to significantly exceed expectations to drive share prices further. Given their current near-all-time-high status, any average earnings reported could potentially lead to a decrease in share prices.

Investors also await economic data, including the June JOLTS report and ADP’s National Employment Report, as well as the July nonfarm payrolls report to get insights into the state of the labor market. Adding to the roster of vital data is a series of PMI readings from S&P Global and the ISM, which will offer indications of the health of the manufacturing sector.

Investors will also keep an eye on the eurozone’s inflation and GDP numbers, potentially influencing international investment decisions. Finally, the Bank of England’s interest rate decision will be critical as markets globally adjust to changing monetary policy signals.

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USDSGD – Prices were unable to break the support despite multiple tries, this is a sign of bullishness.

NZDCAD – Prices are now halfway to the TP, will continue holding. 💪🏻

NASDAQ 100 (US100) – Prices tried breaking higher but got rejected and closed lower. This shows a lack of buying conviction and could lead to a small correction.