In a turbulent economic landscape marked by geopolitical tensions, Federal Reserve uncertainties, and surging Treasury yields, investors are closely monitoring this week’s earnings reports from major tech giants for indications of the stock market’s future direction. These multinational corporate behemoths have the potential to provide Wall Street with valuable insights into the state of the global economy.
What’s Unfolding: Microsoft and Google’s parent company, Alphabet, two of the tech titans that have fueled the market’s growth this year, reported robust third-quarter earnings on Tuesday.
However, Amazon and Meta are yet to reveal their results, and Nvidia and Apple will follow suit later this month. Notably, the most prominent tech players — Apple, Amazon, Nvidia, Microsoft, and Alphabet — collectively constitute a quarter of the S&P 500’s total value, underscoring their significant influence on investors’ portfolios. Hence, their earnings hold substantial sway in shaping market sentiment.
The results announced on Tuesday offered an encouraging start. Alphabet disclosed third-quarter sales of $76.69 billion, an 11% increase from the previous year’s equivalent period, along with quarterly profits of $19.69 billion. Microsoft, on the other hand, reported $56.5 billion in revenue, signifying a 13% year-over-year sales surge, surpassing expectations. Microsoft’s quarterly profits reached $22.3 billion, marking a 27% increase from the corresponding period a year ago. This positive news prompted a nearly 4% uptick in Microsoft’s premarket trading. In contrast, Alphabet shares saw a decline of approximately 6%. Although the company exceeded analyst projections for revenue and earnings per share, it fell short in its cloud business, impacting its stock performance.
Dominance of Big Tech: Excluding the contributions of Big Tech, the S&P 500’s overall earnings would witness a 5% dip this quarter, as per Bloomberg Intelligence data. With their inclusion, it’s anticipated that the S&P 500’s earnings will remain relatively stable.
Particularly, Nvidia is anticipated to be the largest driver of earnings growth for the entire S&P 500 in this quarter, as suggested by FactSet data. If Nvidia were excluded, the decline in earnings for the S&P 500 during the quarter would swell from 0.4% to 1.8%, as estimated by the company.