Tech giants drive stock market rebound as earnings season kicks off
The world’s largest technology companies led a rebound in stocks on Thursday, with traders gearing up for a wave of corporate earnings reports that will test this year’s $4 trillion rally.
Earnings season officially kicks into full swing on Friday, with major financial institutions like JPMorgan Chase & Co., Wells Fargo & Co., and Citigroup Inc. set to report their numbers. Analysts are expecting a rise in profit growth for S&P 500 companies, fueled by a solid economy and strong margins from big tech firms.
George Ball, chairman of Sanders Morris, noted, “It’s not going to be Fed rate cuts that drive the market going forward, rather it’s going to be earnings. Corporate earnings are much stronger than people have anticipated even in this elevated interest-rate environment.”
The S&P 500 hovered near 5,200, while the Nasdaq 100 saw a gain of over 1.5%. Tech giants like Alphabet Inc., Amazon.com Inc., and Apple Inc. saw significant increases in their stock prices. Alphabet Inc. inched closer to the $2 trillion mark, Amazon.com Inc. hit a record high, and Apple Inc. surged on news of plans to overhaul its Mac line.
However, financial shares faced pressure, with Morgan Stanley tumbling following reports of regulatory probes into its wealth arm. Globe Life Inc. also saw a decline after a short-seller call.
Treasury 10-year yields rose four basis points to 4.58%, while a sale of 30-year bonds saw lackluster demand. The euro dropped after the European Central Bank hinted at potential rate cuts due to cooling inflation.
Analysts project that S&P 500 members will show 3.8% annual growth in earnings per share for the first-quarter reporting period. The “Magnificent Seven” cohort, consisting of Apple Inc., Microsoft Corp., Alphabet Inc., Amazon.com Inc., Nvidia Corp., Meta Platforms Inc., and Tesla Inc., is expected to see a 38% rise in profits for the first quarter.
Mark Hackett at Nationwide emphasized, “The next challenge is earnings season, with the reaction to news likely to pave the path forward for equities.”
Investors will be closely watching how companies perform during earnings season to see if growth can justify the current high valuations in the market. With the S&P 500 trading at 21 times profits, there is pressure for companies to deliver strong earnings to support current levels of equity valuation.
Overall, the market is eagerly anticipating the outcomes of earnings reports to determine the future direction of stocks beyond just a handful of tech giants.
