As earnings season goes into full swing, bullish investors hope solid corporate results will stem a tumble in technology shares that has cooled this year’s US stock rally.
The S&P 500’s technology sector has dropped nearly 6% in just over a week, shedding about $900 billion in market value as growing expectations of interest rate cuts and a second Trump presidency draw money away from this year’s winners and into sectors that have languished in 2024.
The S&P 500 has fared somewhat better, losing 1.6% in just over a week, with declines in tech partly offset by sharp gains in areas such as financials, industrials and small caps. The benchmark index is up more than 16% so far this year.
Second-quarter earnings could help tech reclaim the spotlight. Tesla and Google-parent Alphabet both report on Tuesday, kicking off results from the “Magnificent Seven” megacap group of stocks that have propelled markets since early 2023. Microsoft and Apple are set to report the following week.
Big tech stocks “have been leading the charge, and it’s for a good reason,” said Scott Wren, Senior Global Market Strategist at the Wells Fargo Investment Institute. “They’re making money, they’re growing earnings, they’re owning their niche.”
Strong results from the market’s leaders could assuage some of the worries that have recently dogged megacaps.
On the other hand, signs that profits are flagging or artificial intelligence-related spending is less than anticipated would test the narrative of tech dominance that has boosted stocks this year. That could turn quickly into a problem for broader markets: Alphabet, Tesla, Amazon.com, Microsoft, Meta Platforms, Apple and Nvidia have accounted for around 60% of the S&P 500’s gain this year.
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