Big Tech Earnings In Focus for S&P 500 and Investors?

The stock markets have staged a stellar comeback in the first seven months of 2023. The table below shows that the stock market is up 17.5% year-to-date, outpacing other asset classes such as gold and bonds.

In the upcoming week, the big tech earnings of Microsoft (NASDAQ: MSFT), Alphabet (NASDAQ: GOOGL), and Meta Platforms (NASDAQ: META) will likely drive the S&ampP 500 index. Let’s see what investors expect from each of these companies in the June quarter.

What to expect from Microsoft, Meta, and Alphabet stock in Q2?

Analysts tracking Microsoft expect sales to rise by 7% to $55.47 billion and adjusted earnings to rise by 14.3% to $2.55 per share.

Wall Street forecasts Meta to increase sales by 8% to $31.1 billion, while adjusted earnings are expected to surge 18.3% to $2.91 per share in the June quarter.

For Alphabet, analysts expect revenue and adjusted earnings in Q2 of 2023 to rise 4.5% and 10.7% to $72.8 billion and $1.34 billion, respectively.

The tech giants have already outpaced the broader markets by a wide margin in 2023. For instance, shares of Meta, Microsoft, and Alphabet have surged 144.5%, 44%, and 36%, respectively, this year.

A final interest rate hike by the Fed?

On Tuesday, the Federal Open Market Committee (FOMC) will hold a two-day meeting involving Federal Reserve policymakers. The gathering will conclude on Wednesday with an interest rate announcement and a press conference led by Chair Jerome Powell. CME GroupU+02019s FedWatch Tool suggested that the Fed will increase interest rates by 25 basis points (bps).

Since March 2022, the Fed has amplified its benchmark federal funds rate by 500 bps to control the highest inflation rates seen in over 40 years. A rise of 25 bps would place the federal funds rate between 5.25% and 5.5%, marking the highest levels in 22 years.

On Thursday, the Bureau of Economic Analysis (BEA) will release second-quarter GDP figures. As per the forecasts from the Conference Board, the U.S. economy is likely to have expanded by 1.1% in the second quarter, surpassing initial growth projections of 0.6%.

Moving forward, although growth might significantly slow down in the latter half of 2023, a robust labor market coupled with easing inflation suggests that the U.S. economy will likely steer clear of a recession, as per Deloitte.

Inflation will be under focus

Friday will see the release of the Personal Consumption Expenditures (PCE) Price Index for June by the BEA. This index is the FedU+02019s favored measure of inflation. Price increases for June are anticipated to be 0.1%, matching the pace of May.

The annual rate of price increases likely dropped sharply to 2.9% from 3.8% in May, drawing closer to the FedU+02019s 2% target. Core prices, excluding the unstable food and energy costs, probably increased by 0.2% from May and 4.3% from the same period last year.

The Fed prefers the PCE Price Index as an inflation gauge as it more accurately reflects consumer spending decisions compared to the Consumer Price Index (CPI), and its basket of goods is updated more regularly.

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