MSFT, GOOGL, AMZN and META Earnings to Guide Markets

S&P 500 Outlook:

• the Standard & Poor’s 500 And Nasdaq The 100 Road ended slightly lower as bullish momentum continued to fade
• Megacap tech’s quarterly earnings will steal the spotlight next week
• Traders should focus their attention on the financial results from Microsoft, Alphabet, Meta and Amazon in the coming days

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Price action has been unimpressive for the S&P 500 and Nasdaq 100 in recent days despite Tesla’s sharp sell-off after a disappointing quarterly performance. Both indices have lacked clear directional conviction, at least since early April, although they are heading modestly lower this week, with the former declining 0.10% to 4133.5 and the latter declining 0.6% to 13000.8.

In the grand scheme of things, stocks have been bouncing despite serious headwinds such as higher rates, higher inflation, slower growth and shrinking profits, but the positive momentum that has led to a strong rally in major US stock indexes since mid-March is visibly waning. It appears that investors are waiting to see more corporate earnings before allocating additional capital to risk assets.

S&P 500 and NASDAQ 100 chart

source: TradingView

On that note, traders will have an opportunity to better assess the health of US companies and the broader outlook in the coming sessions when many of the major companies reveal their financial results for the previous quarter and make forward-looking comments.

While there are several major releases to watch out for, the next week’s highlights will be from the earnings reports Microsoft (MSFT), Amazon (AMZN), Metadata Platforms (META), Alphabet (GOOGL), the parent company of Google. Together, these names account for roughly 14% of the weight of the S&P 500, so they can certainly determine the near-term market direction and trading bias.

Below is a rundown of next week’s key company reports that are worth watching, but for a full list of upcoming events, side by side: Wall StreetForecasts, check DailyFX earnings calendar.

source: DailyFX earnings calendar

Megacap tech has had one of the busiest trades of 2023, perhaps on the assumption that the sector will continue to be resilient even when economic growth slows significantly later this year. This has helped keep Wall Street afloat in recent months despite the banking sector turmoil that erupted in March.

To ensure that sentiment remains benign, market hitters will have to deliver strong results and, most importantly, positive guidance, otherwise the S&P 500 and Nasdaq 100 could be in for a rude awakening.

When analyzing earnings reports from the likes of Microsoft and Alphabet, there is another variable that traders should consider: management’s view of artificial intelligence (AI) and related products.

Microsoft’s rapid foray into artificial intelligence has been the talk of the town and has set off a race to control what could be the next big revolution in the tech industry. If the major players in the space fail to live up to the hype and investors’ high expectations or are unable to come up with a clear technology investment strategy, Wall Street could run out of patience, setting the stage for a meaningful sell-off.

By Diego Coleman, Contributing Strategist at DailyFX