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In an unstable economic climate marked by geopolitical unrest, concerns about the Federal Reserve and soaring Treasury yields, investors are closely watching this week’s Big Tech earnings for clues about where the volatile stock market may head next.
The world’s biggest multinational companies could offer Wall Street some insight about how the global economy is faring.
What’s happening: On Tuesday, Microsoft and Google parent Alphabet -— two of the so-called Magnificent Seven tech companies that have driven the market’s gains this year — released strong third-quarter earnings.
Still, there’s more to come from Amazon and Meta this week. Nvidia and Apple will report later this month. The top tech companies — Apple, Amazon, Nvidia, Microsoft and Alphabet — combine to make up a quarter of the S&P 500’s value, giving them an outsized impact on investors’ portfolios. That means investors are watching their earnings particularly closely for prognostications about where the market is headed next.
Tuesday’s results were a good start. Alphabet reported quarterly sales of $76.69 billion, up 11% from the same period in the prior year. The company also posted profits of $19.69 billion for the quarter.
Meanwhile, Microsoft posted revenue of $56.5 billion, representing 13% year-over-year sales growth, also beating expectations. Microsoft’s quarterly profits hit $22.3 billion, up 27% from the year-ago period.
Microsoft shares gained nearly 4% in premarket trading as traders breathed a sigh of relief. Alphabet shares fell by about 6% — the company beat analyst expectations on revenue and earnings per share, but fell short in its cloud business, sending the stock lower.
Big tech controls the market: Excluding Big Tech, the average earnings for S&P 500 companies would drop by 5% this quarter, according to Bloomberg Intelligence data. With them, the S&P 500’s earnings are expected to be flat.
Nvidia in particular is expected to be the largest contributor to earnings growth for the entire S&P 500 this quarter, according to FactSet data. If the company were excluded, the earnings decline for the S&P 500 for the quarter would increase to 1.8% from 0.4%, the company estimated.
But in a market where techs are so overweight problems can arise. “Big Tech valuations pose risks for the broader markets, as Big Tech has contributed to almost all of the stock market’s year-to-date gains,” said David Bahnsen, chief investment officer of the Bahnsen Group. “This lack of market breadth suggests that investors are still highly prone to chasing momentum and getting overly excited about different market themes and stories, such as artificial intelligence.”
It also suggests that there’s not a lot of room for any Big Tech earnings missteps. Until all the Big Techs report, investors will remain on tenterhooks.
“The movement of the Magnificent Seven after earnings will be very telling,” said Louis Navellier, chairman of Navellier & Associates.
US and Gulf nations target ‘secret’ Hamas investment portfolio worth up to $1 billion
The United States along with some Middle Eastern nations are stepping up efforts to target a “secret” Hamas investment portfolio government officials believe to be worth up to $1 billion, reports my colleague Matt Egan.
To target the Hamas investment portfolio, a US official said Tuesday the Treasury Department is working with members of the Gulf Cooperation Council: Saudi Arabia, Qatar, Kuwait, Oman, Bahrain and the United Arab Emirates.
Following the Hamas terror attacks on Israel, US and Saudi officials convened an emergency meeting on Tuesday in Riyadh of the Terrorist Financing Targeting Center, which includes the United States and the GCC nations. The meeting was originally scheduled to take place in November.
The US official said there has been a redoubling of efforts since Hamas’ October 7 attack on Israel to use the TFTC, which was created in 2017, to go after Hamas, Hezbollah and other Iranian-aligned militant groups, including by sharing relevant, timely and actionable information.
Last week, Treasury leveled sanctions on individuals that officials say are managing assets in a “secret” Hamas investment portfolio likely valued at between $400 million and $1 billion, according to a US official. The official added that the portfolio is generating significant amounts of revenue for Hamas.
Treasury has said the global portfolio of investments includes companies operating “under the guise of legitimate businesses” in Sudan, Algeria, Turkey, the United Arab Emirates and other nations.
“We cannot tolerate a world in which Hamas and other terrorist organizations’ fundraisers live and operate with impunity, abusing the financial system, to sustain their terror.” Brian Nelson, Treasury’s under secretary for terrorism and financial intelligence, said during prepared remarks at the emergency TFTC meeting.
Apple announced its second product event of the season, a month after introducing its new iPhone 15 lineup. New iMacs are likely, reports my colleague Samantha Murphy Kelly.
The company sent invitations to members of the media for a scheduled keynote on Monday, October 30 at 8 p.m. ET/5 p.m. PT, later than it typically kicks off events. It will be accessible via livestream only; Apple usually hosts its product launches both in person and online.
The tagline for the event — “scary fast” — is an apparent nod to the likely unveiling of its next-generation silicon chip, M3, as well as Halloween. The company is expected to show off new iMac computers boasting the new powerful chipset in a move that should also boost Mac sales. Mac sales have been down this year.
“Weak demand, excess inventory, and a worsening macroeconomic climate were all contributing factors for the precipitous drop in shipments of traditional PCs,” market research firm IDC said earlier this year.
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