Stocks are attempting to rally after a $2 trillion selloff, with investors keenly monitoring this week’s flood of corporate earnings reports. The spotlight is squarely on big tech, as companies face pressure to prove the profitability of their artificial intelligence (AI) endeavours.
Nearly 40% of the S&P 500, including most of the “Magnificent Seven” megacaps, will unveil their results this week. Some analysts predict a 40% rise in their profits from a year ago. This critical earnings season arrives amidst geopolitical concerns and signals that the Federal Reserve will maintain higher interest rates.
Wall Street analysts are sharply divided on whether corporations can meet the high expectations. While Morgan Stanley anticipates improved profit growth, JPMorgan Chase & Co. sees a clouded outlook due to inflation, a strong dollar, and geopolitical tensions, signalling a potentially volatile market.
Despite these concerns, a Bloomberg Markets Live Pulse survey shows optimism – nearly two-thirds believe earnings will boost the S&P 500.
Key Themes to Watch in The Upcoming Days:
• Tech Giants in Focus: America’s tech leaders report results this week and face pressure to demonstrate the profitability of AI investments.
• Earnings Growth Under Scrutiny: Analysts are scrutinizing companies’ ability to maintain earnings growth in the current economic climate.
• The ‘Higher for Longer’ Rate Outlook: Investors are closely monitoring how rising interest rates and persistent inflation could significantly impact corporate guidance, a crucial factor in their investment decisions.
The S&P 500’s six-day consecutive losing streak has finally ended, with the 5,000 confirming its strength as the most significant weekly support for the index’s price. Volatility continues to increase, as shown on the Bollinger bands, and the expectation for future corporate results might enhance market uncertainty. The RSI indicator showed a significant downward momentum and got close to an oversold condition due to the substantial sell-off; however, the price recovered and remained in a “neutral” zone. The following critical level for the index is around 5,100 and above the 50-day moving average at 5,118.69; it is the second considerable level for the price to beat to reach new highs.
