US Stocks’ Recent Uptrend halted Ahead of Tech Giants’ Earnings

Stocks’ rally to record highs in 2024 has come to a pause as corporate earnings season begins to highlight the market’s true potential; Attention is now turning to the profits of the technology sector, especially the so-called “Great Seven”, the technology giants: Apple, Microsoft, Meta Platforms, Amazon, Tesla, Alphabet (the parent company of Google), and Nvidia – which will announce its profits tonight and in the coming days and is the arbiter. The ultimate top performer in the stock market.

Earnings Closely Watched

Tech giants are predicted to report robust earnings growth, but at a slower rate than in the previous year’s exceptional performance. This raises questions about whether these significant corporations can live up to or beyond the high expectations of investors. The valuations are still negative. Because technology is limited, a dejected attitude may cause people to sell. On the other hand, if results meet expectations, stocks may rise again and the market may reach all-time highs.

Market Concerns:

Attention has been shifting away from large tech firms in recent weeks and into inexpensive sectors; tonight’s corporate earnings reports could determine whether this trend persists or whether a return to the technology sector is imminent due to the company’s underwhelming performance. Leading player in the world economy United Parcel Services (UPS) has added more prudence to the market.

Investors are currently keeping a close eye out for signs of a wider economic slowdown, and with hopes for an interest rate cut in September, the forthcoming economic data—particularly the GDP and readings of inflation indicators—will be critical in influencing the Federal Reserve’s decision, since a strong economy makes rate cuts possible. The lack of interest depresses investor sentiment.

Earnings Impact:

Analysts see a path to ongoing growth in the Tech sector and suggest that the enormous earnings potential for the tech titans transcends valuation worries. Some see the recent dip in the tech sector as a hint that earnings are already down, which makes it easier for businesses to beat estimates. But they exercise prudence. that every significant mistake could require a fix.

Turning Point Amid Uncertainty:

The coming days bring excitement that cannot be ignored, and the profits of important companies will determine the pace of market direction, so key questions remain that require answers: Will the technology giants achieve impressive or disappointing profits? Will the market continue to rotate away from technology companies or reverse course? Will economic data prompt the Federal Reserve to cut interest rates in September? The answers to these questions have a ripple effect, affecting everything from investor confidence and sector allocations to the overall trajectory of the stock market. Earnings season can represent a turning point, either pushing the rally further or leading to a correction, and only time will tell which path the market chooses. in the end.

Federal Reserve:

The possibility of the Fed cutting interest rates in September is being priced in by the market, but upcoming economic data releases, especially GDP and inflation numbers, will be crucial. Strong economic data may delay the possibility of an interest rate cut, which could dampen investor sentiment.

Bets on a September rate cut have risen to nearly 94%, up from about 60% last month, and a Reuters poll suggests the Fed is expected to cut rates twice this year, in September and December.

Additional Developments

Coca-Cola shares rose 1% after increasing annual sales and earnings expectations, while Comcast shares fell 4.3% after missing revenue estimates. As of Monday, 81.1% of the 74 S&P 500 companies that have reported earnings this season exceeded expectations.

It should be noted that the performance of stock markets indicates a modest increase at the time of publication of this report and economic data scheduled for release this week includes the Personal Consumption Expenditures Price Index, PCE, the Fed’s preferred gauge of inflation, which is critical to assessing the outlook for monetary policy.