Industry
A bevy of major U.S. earnings reports next week led by Apple, Microsoft and Facebook could help technology and growth stock recapture their leadership after a recent run by banks, energy and beneficiaries another potential economic reopening.
The New York stock exchange with the banner of Hims & Hers Health, Inc. is pictured as a runner-up in the city of Manhattan in New York City, New York, USA, January 21, 2021. REUTERS / Carlo Allegri
NEW YORK: A bevy of major U.S. earnings reports next week led by Apple, Microsoft and Facebook could help technology and growth stock recapture their leadership following a recent run by banks, energy and energy. other potential beneficiaries of economic reopening.
After driving higher markets for most of 2020, stocks related to backup technology late last year led to so-called value or circular plays, which are expected to gain their businesses benefit most from the economic recovery promised by vaccines against COVID-19.
That trend has stalled in recent days when investors measured the forecast of default from major banks and a prestigious quarterly report from Netflix that raised its shares 17per percent. The Russell 1000 growth index rose 3.3 percent in the past week as of Friday morning, and its value fell 1.5per percent.
A crop of fourth quarter results next week – with around a quarter of the S&P 500 report – could help determine whether the recovery in growth stocks will continue, which could threaten the rally. recently in value and cyclical segments, said Chuck Carlson, chief executive officer at Horizon Investment Services.
“Maybe that’s the story of an employment season,” he said. “What will employment mean for the sustainability of this cycle that has taken place in the last eight, nine weeks. ”
Stable growth and resilience to the pandemic coronavirus disease made stocks a desirable technology for investors, who poured money into the region as widespread seizures wreaked havoc on the U.S. economy.
But a resurgence in tech performance could also revive concerns about investor gathering to popular names. The five largest technology-related companies make up about 22 percent of the weight of the S&P 500.
In addition to Apple and Microsoft, other companies in the tech sector that are due to report next week include payment processing companies Visa and Mastercard and semi-managed company Advanced Micro Devices. Tesla, whose explosive share price turned an electric car maker into one of the most valuable companies in the world, reports Wednesday.
So far, corporate profits have been strong in the table: Of 66 S&P 500 companies that have recorded earnings, 87.9per percent have hit Wall Street estimates, well above the long-term average of 65per cents, according to IBES data from Refinitiv.
Investors are particularly cautious on a corporate outlook, as an economic recovery is expected this year. Wages are expected to rise 23.7per percent this year after falling 14.1per percent in 2020, according to Refinitiv.
While technology sector employment remained broadly stable in 2020, projected profit growth of 14 per cent in 2021 is below the overall S&P 500 and weakens areas such as finance, business and products. “The danger is in situations where you had a good 2020, which is about to be halted by this statement next week, what do you do for an encore?” said Walter Todd, chief investment officer at Greenwood Capital.
Demand for Apple’s iPhone 12 will be a key issue when the company reports Wednesday, said Robert Pavlik, senior portfolio manager at Dakota Wealth Management. Analysts on average expect the company to report a 13 percent increase in quarterly earnings. Kim Forrest, chief investment officer at Bokeh Capital Partners, is keen to see how well Microsoft is making progress with its work-from-home results. The software giant is expected to post an 8.7per percent increase in earnings.
Facebook, which reportedly reported a 25 percent rise in earnings, could raise questions surrounding any collapse for the social media industry since the U.S. elections and President Donald Trump’s ban from various platforms , investors said.
Earnings season is heating up as the S&P 500 is up to records to start in 2021, worrying some investors who say corporate yields in the coming year need to be justified high stock valuations. “Stocks have been running well since October and you have to wonder with all the talk about the market possibly pulling back, when it will come or what will cause it,” Pavlik said.
(Reporting by Lewis Krauskopf; Editing by Ira Iosebashvili and Susan Fenton)