Category Big Tech

The One Thing Driving the Market 

It's risk on. That's the market's sentiment. Question is whether that risk is worth it? There are only a handful of stocks carrying the market higher - a sure sign of both fragility and bearishness. Are there are only "10" stocks that can grow? We have not seen a market this narrow since the dot.com bust. Now should names like Amazon, Google, Apple, Microsoft, Meta and Tesla pull back from nose-bleed valuations - the whole house comes down with it.

If the Apple Falls from the Tree… Does the Tree Fall?

Apple managed to beat very low expectations. However, revenue fell for the second consecutive quarter. Nonetheless, the stock was slightly higher on the news. Consider it a safety trade. More broadly, stocks fell today as they wrestled with the threat of more regional bank failures and a committed Fed. Here's my basic question: will we see three rate cuts before the end of the year? My view is we won't see a single cut (let alone three). If I'm right (and I may not be) - there will be a painful adjustment in the market.

A Very Narrow Market 

Last week all eyes were on large cap tech earnings. They delivered a mixed bag... but on the whole 'better than feared'. Q1 earnings didn't fall off a cliff. Single digit growth (top and bottom line) was largely cheered - which highlights how low expectations were. Next week eyes turn to the Fed. The market has priced in a 25 bps hike for May - but will it be a 'dovish' hike - where they offer language to suggest a pause in June? Or will they say "there's more work to do"?

Winners & Losers Post Big Tech Earnings

What did we learn from big-tech earnings this week? In short, their earnings were "better than feared". However, they were far from stellar. The 'best of the best' could only muster single digit growth (Google was negative). The Search giant also disappointed on expense management. Amazon offered very soft guidance - with AWS growth expected to fall to deliver only 11% growth next quarter. That's a long way from its 40% growth a year ago. In summary, the challenges are not over for the sector - however investors are paying lofty premiums.

Big Tech on Deck

More than 25% of the total S&P 500 market capitalization rests with just 5 companies. And those 5 stocks are all in tech. This week we hear from 4 of those 5. The bar has been set extremely low - therefore it won't be too hard for these companies to exceed expectations. But don't expect earnings and revenues to be stellar. If anything - expect single digit growth from these names. However, the market will take that.

Market Has Bad Breadth Market Has Bad Breadth

Market Has Bad Breadth

The S&P 500 is up about 3% to start the first quarter of 2023. On the surface things look good. But what if we look 'under the hood'. Most sectors are lower - especially those which are economically sensitive (like banks, energy, small caps and materials). However, big tech is carrying the market higher. That's not necessarily a good sign.

Bear Market Rally? Or Something More?

About 100 of the 500 S&P companies have reported Q4 2022 earnings. TL;DR is they are 'average' at best. Most have barely met already lowered expectations. What's more, forward guidance is weak. However, the bulls are betting on inflation continuing to plunge forcing the Fed to cut rates later in the year. I'm not yet prepared to support that thesis... with services inflation still running at 5.2%. There are some signs things are improving.

Fed Aftermath

Apple, Amazon, Microsoft and Google have all been crushed post earnings. Apple is the 'best' performer - down approx 13% the past two weeks. What's next for large cap tech? I see more downside... and this post explains why.

We’ve Seen This Script Before

Q3 2022 big-tech earnings are behind us - with only one winner. Apple reported inline results with weak guidance - but enough to send the stock 7% higher. The rest however were slaughtered on weak earnings and forward guidance. But it was the Facebook's "metacurse" which sent the stock reeling almost 30%... Amazon was also crushed on a poor Q4 outlook.

Tech May Catch a Short Term Bid – But It’s Expensive

Stocks look set to rally a little in the near-term from oversold levels. However, act with caution, as they are looking expensive given the environment of expected EPS decline.