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S&P 500 set to react to Tech Titans Thursday

Now that the latest FOMC meeting is behind us, equity markets are set to shift their attentions to the earnings due after US markets close on Thursday Feb 2nd out of these three tech giants: Apple, Alphabet, and Amazon.

And here’s something else they all have in common: each company has a market cap of more than one trillion US dollars!

  • Apple: US$ 2.29 trillion
     
  • Alphabet: US$ 1.29 trillion
     
  • Amazon: US$ 1.05 trillion

 

With a combined market cap US$ 4.63 trillion, that accounts for nearly 13% of the S&P 500’s total market cap of US$ 35.939 trillion.

In other words, given the sheer heft of these three tech giants, the market’s reaction to these tech earnings should have a major influence on how the broader S&P 500 index performs when US markets reopen on Friday, February 3rd.

Here are the current forecasts for some key items in the respective earnings:

  1. Apple
     
    • Revenue: US$ 121.14 billion
    • Net income: US$ 30.96 billion
    • Expected 1-day post-earnings move: 3.91%
       
  2. Alphabet
     
    • Revenue: US$ 63.2 billion
    • Net income: US$ 17.4 billion
    • Expected 1-day post-earnings move: 5.26%
       
  3. Amazon
     
    • Revenue: US$ 145.8 billion
    • Net income: US$ 6.2 billion
    • Expected 1-day post-earnings move: 7.8%

 

Key talking points range from Apple’s supply-chain issues in China and the US dollar’s impact on its earnings, to whether the mass layoffs at Amazon and Alphabet will help their respective financial standings over coming quarter.

With so much at stake, investors and traders will be looking for:

  • how these companies’ earnings last quarter held up versus market forecasts
     
  • and the earnings outlook, given the economic challenges ahead for the rest of 2023

 

From a technical perspective, the S&P 500 has posted several bullish milestones (as marked in chart below)

(1) yesterday’s (Wednesday, Feb 1st) intraday prices punched to its highest levels since Sept.

(2) breached the upper boundary of its 2022 downtrend.

(3) formed a “golden cross” last week.

(4) Its 14-day RSI (relative strength index) has yet to hit the 70 line which officially marks “overbought” levels.

Such technical tell-tale signs suggest that this benchmark index (which measures how US stock markets have performed overall) has more room to chase immediate gains, especially now that the Fed has indeed downshifted its rate hikes.

S&P 500 set to react to Tech Titans Thursday

 

Potential scenarios ahead:

  • If today’s tech titan earnings exceed market expectations, that may prompt the S&P 500 to break above the 4156.2 line, which is the 50% Fibonacci retracement level from 2022’s downtrend. This level has offered strong resistance on several episodes since September.

If the earnings outlook is positive for these tech heavyweights, equity bulls (those hoping prices will move higher) will be gunning for the 4216.2 peak from late-August as the next target.

 

  • However, if today’s tech earnings disappoint markets, that may prompt the S&P 500 to unwind recent gains.

    Immediate support may be found at the early-December peak at 4105.6, though this blue-chip index should be able to comfortably hold its head above the psychologically-important 4,000 mark.

 

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