It’s another big week for tech stocks, with results coming from Google, Amazon, Meta, and others.
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Buckle up: It will likely be another exciting week for technology stocks.
The tech sector has had a poor start to the year, with the Nasdaq Composite —a proxy for U.S. tech — down 13% since the beginning of January, firmly in correction territory.
Last week took investors on a wild ride marked by extreme intraday price swings as traders faced off against the prospect of higher interest rates and tighter monetary policy from the Federal Reserve.
But tech stocks closed the week out strong. A late-in-the-day rally saw the S&P 500 IT sector gaining 4.3% on Friday, with the Nasdaq climbing 3.1%.
“Future historians might conclude that it must have been one of the dullest weeks in the Nasdaq’s history given that we closed the week 0.01% higher than the previous Friday, the fifth smallest % weekly move in the history of the index,” noted Jim Reid, a strategist at Deutsche Bank. “However, beneath the surface there was extraordinary volatility as every day saw swings between 2.75% and 6%.”
There were two bright spots amid the rollercoaster: Strong corporate earnings from Microsoft (ticker: MSFT) and Apple (AAPL).
Software giant Microsoft reported record quarterly revenue above $50 billion for the first time, beating expectations, and offered a rosy outlook for the current quarter last Tuesday. That helped boost stock market futures for the next day, though the gains were given back by volatility driven by an announcement from the Fed.
A similar pattern emerged Thursday, when iPhone powerhouse Apple reported better-than-expected results for the last quarter and said supply-chain constraints were easing. It gave an added lift to an already-upbeat stock market last Friday.
As we head into what’s expected to be another volatile week for markets, company results will continue to be in focus. As Barron’s reported earlier this month, the current corporate earnings season will be crucial for tech as Wall Street considers getting back to bullishness on a sector that has historically outperformed, but has recently slumped.
“This week is another crucial test for the battered tech sector,” said Dan Ives, an analyst at broker and investment bank Wedbush. “The Street needs to hear more good news from tech stalwarts with fundamentals now in the focus.”
NXP Semiconductors (NXPI) kicks off tech earnings Monday after the closing bell. Fellow chip group Advanced Micro Devices (AMD) will follow after the close Tuesday, alongside Electronic Arts (EA) and Google-parent Alphabet (GOOGL). Late Wednesday brings Facebook-parent Meta Platforms (FB) and Spotify (SPOT), before Amazon (AMZN), Activision Blizzard (ATVI), and Snap (SNAP) after the bell Thursday.
“We are slowly seeing a changing narrative take shape for the tech sector as the bullish prints/guidance by tech stalwarts Microsoft and Apple last week set a positive tone for the Street heading into this week,” said Ives.
We’ll see if that continues. The Wedbush tech analyst said “the biggest fundamental worry” for the tech sector remains the global semiconductor shortage, so any impact on earnings or guidance from chip problems has the potential to be felt more widely.
More specifically, Microsoft’s results — which outlined continued momentum in demand for enterprise cloud software — bodes well for other tech giants, Ives said.
“Important data points from Google and Amazon will be key around the cloud story with the Street laser focused on the overall demand story for 2022,” he added.
Consumer and advertising will be in focus from Facebook, Google, and Snap, especially with respect to the impact of Apple’s recently-changed rules for advertising on mobile apps, which pinched Snap particularly hard.
“The digital advertising spending environment will be front and center,” Ives said, “with the Street trying to get more granularity around the negative headwinds from Apple’s [privacy changes].”
Write to Jack Denton at [email protected]
