The week starting July 25 may set the tone for things to come in the future for the US stock market. Several big corporations will be announcing their earnings while the US Fed will be meeting on Wednesday to declare the interest rate decision. Nearly 150 companies in S&P 500 index including the ones from the big-tech sector are reporting the second quarter results ending June 2022.
“On Tuesday and Wednesday, Federal Reserve policymakers are expected to meet for the July policy meeting, and they might increase the interest rates by at least 0.75 per cent. The second quarter’s advance estimate of US GDP growth will be unveiled on Thursday, offering important hints about whether the country’s economy is headed for a recession. Notably, huge tech companies like Apple, Amazon, Microsoft, and Alphabet, are due to report earnings, and it could be the busiest week of the annual earnings calendar,” says Kunal Sawhney, CEO of Kalkine Group.
Factset reports that the second-quarter earnings season for the S&P 500 continues to be weaker than normal. Both the number of S&P 500 companies reporting positive earnings surprises and the magnitude of these positive surprises are below their five-year averages. Overall, 21% of the companies in the S&P 500 have reported actual results for Q2 2022 to date. Of these companies, 68% have reported actual EPS above estimates, which is below the five-year average of 77%.
Last week US stock market sent mixed signals. The 5-days trading session last week saw Dow, S&P 500, and Nasdaq clocking positive returns but US equities finished lower on Friday trading.
FAANGMs stocks were a drag as digital ad-linked plays were hit by Snap’s earnings. Travel and leisure, life-science tools, software, semis, and telecoms were weaker groups. Defensives, oilfield service, rails, homebuilders, autos, multi-industrials, and hospitals outperformed.
The big earning season starts Monday with results from Whirlpool, Cadence Design Systems, Southern Copper Corporation, Tata Motors, Universal Health Services, Newmont, and NXP Semiconductors amongst others.
On Tuesday, results from Microsoft, Alphabet, Visa, UPS, 3M, Chipotle Mexican Grill, Raytheon Technologies Corporation, McDonald’s, Coca-Cola and General Electric amongst others will be awaited.
According to Zacks Investment Research, Tech giants like Microsoft, Alphabet, and Amazon (through its Amazon Web Services or AWS arm) receive a ton of money from other companies for software and services. It is reasonable to expect those receipts to take a hit as customers get cautious in the face of macroeconomic challenges. We will see what we hear from these companies in their Q2 releases, but historically software spending doesn’t get cut to the same extent as ad spending. Microsoft, Amazon (AWS), and Alphabet are the leaders in the cloud computing space.
Results This Week
Meta Platforms, Inc.
T-Mobile US, Inc.
Bristol-Myers Squibb Company
Boeing Company (The)
Merck & Company, Inc.
Thermo Fisher Scientific Inc
Honeywell International Inc.
Exxon Mobil Corporation
Procter & Gamble Company (The)
Sony Group Corporation
Charter Communications, Inc.