Major Earnings Could Shake Up Nasdaq This Week

Most of the "Mag 7" (Alphabet, Meta, Microsoft, Amazon, and Apple) will report this week, which will be pivotal for sustaining Nasdaq's ~15% gains this month or triggering a pullback or even a correction.

What Markets are Looking For

• For the first time ever, five of the Mag 7 stocks will all report after the market closes on Wednesday, setting the market up for a tech/AI reset as investors gauge the impact of earnings.
• Fucus is likely to be on guidance as investors look for signs that solid earnings from tech companies earlier in the season indicate the sector remains buoyant.
• Markets are looking for further updates on the impact of AI after Meta and Microsoft followed Amazon with large workforce reductions, as well as how higher energy costs are affecting consumer behaviour.

Nasdaq Rebound on Outlook, AI

The tech-heavy Nasdaq rose to a new record high on Friday ahead of a very busy earnings calendar this week, buoyed by Intel's earnings, which showed strong AI-driven demand and echoed bullish guidance from others. The index is set to open in the red on Monday after little progress toward reopening the Strait of Hormuz, and the DOJ also dropped its probe into the Fed, clearing the way for Kevin Warsh to be appointed Fed Chair next month.

The solid reports from tech stocks early in the season could have set a high bar for the plethora of major tech names reporting this week. The average net income for the "Magnificent Seven" is expected to rise 25% from last year, more than doubling the rest of the S&P 500, making it a major test of investor appetite. The focus will likely be on guidance, as it has been with the tech companies reporting so far, as investors hope the turmoil of the first three months is in the rearview mirror. Traders will also likely be looking at the effects of AI on the broader market after Meta and Microsoft announced more than 20K job cuts last week.

He's what analysts are expecting for the major names this week:

Alphabet Riding the Cloud

Google's parent company reports on Wednesday after the bell, with analyst consensus for EPS of $2.63, down from $2.81 a year ago. Revenue, however, is anticipated to rise from $195 to $106.9 billion, with the difference in direction between top and bottom attributed to increasing capital expenditures. At its annual results three months ago, Alphabet said it would nearly double its investment in AI this year to $175-185 billion. Investors were apparently comfortable with this level of spending, given that cloud revenue is growing at a 50% annual rate. However, ad revenue can't be neglected, particularly as the economy is disrupted by higher energy prices.

Meta Delivering on Outlook

The social media platform company will update investors after the market close on Wednesday, with analysts expecting earnings of $6.65, down from $6.73 last year. That's a relatively small increase compared to the 31% jump in revenue, which is anticipated to reach $55.6 billion. The company's shares rose after its earnings last quarter, which included rosy guidance. Now, traders will likely be looking for delivery on the promises, with a focus on how the latest cost-cutting measures will improve the bottom line.

Can Microsoft Regain Momentum?

The software company is another major name reporting after Wednesday's close, with a consensus for earnings of $4.06, up from $3.46 a year ago. Revenue is anticipated to rise 16% to $81.4 billion, as investors look to see if AI is displacing demand for software. Meanwhile, the company could be even more reliant on its cloud revenue growth, which powered its stock price over the last couple of years.

Amazon: Retail Back in Focus

The online seller will also report on Wednesday after the market closes, with the median analyst projection for EPS of $1.65, up from $1.59 last year. Sales are anticipated to rise 14% to $177.2 billion. After years of focus on AWS' cloud growth, markets are now also interested in the company's sales projections as consumers face higher prices. Amazon could provide valuable insights into the US economy and have a greater impact on the Nasdaq through that channel.

Apple: AI and new CEO

The iPhone maker will update investors after the bell on Wednesday, with analysts expecting earnings of $1.95 per share, up from $1.65 per share a year ago. Sales are projected to rise 15% to $110 billion amid comfortable growth in iPhone deliveries. However, the focus might be on news that was already reported, with CEO Tim Cook stepping down later this year. Earnings are a good opportunity for incoming CEO John Ternus to provide some outlook, including whether the company will push more into AI now.

Nasdaq V-Shaped Recovery at VWAP Premium

Nasdaq has formed a textbook V-shaped recovery from its 31 March low of 22800, rising 20% in under four weeks. With the prior record high of 26250 left behind as support and a series of bullish candlesticks with virtually no pullback, the upper VWAP now points to 28K. However, prices also trade at a premium to the medium VWAP line at 28825, while overbought, suggesting that a drop below 27K might open the door to lower territory.

Source: SpreadEx | US Tech 100, Daily Chart