The big U.S. banks gave mixed signals on the economy when they reported quarterly results this month, and market optimism has seesawed.
But with big-tech stalwarts Amazon.com Inc., Google parent Alphabet Inc., Microsoft Corp. and Facebook parent Meta Platforms Inc. batting cleanup this week, the results could determine the course of the earnings reporting season in the weeks ahead. And in the weeks ahead, results from Nvidia Corp., the massive chipmaker and AI darling, could play the biggest role in defining that path.
“This has felt more like a bear market starting with rating agencies downgrading U.S. debt,” Ken Mahoney, chief executive of Mahoney Asset Management, said in emailed commentary on Friday. “Tech earnings next week will decide where we go from here.”
“If we do get a beat and raise from some of the heavy hitters, that will give the market a boost and then we will have analysts scurrying to update their models and see price target upgrades,” he continued.
Microsoft
MSFT,
and Alphabet
GOOGL,
GOOG,
report Tuesday. Meta
META,
reports Wednesday, while Amazon
AMZN,
on Thursday. Meta and Amazon, which command massive market valuations, are among the companies expected to do the heavy lifting on earnings growth even though Wall Street overall currently expects a slight per-share profit decline for the S&P 500 Index
SPX
overall.
Still, according to FactSet, Nvidia, which reports next month, will likely be the heaviest lifter overall.
“NVIDIA is also expected to be the largest contributor to earnings growth for the entire S&P 500 for Q3,” FactSet Senior Earnings Analyst John Butters said in a report on Friday. “If this company were excluded, the blended earnings decline for the S&P 500 for Q3 would increase to -1.8% from -0.4%.”
The results from the four tech big tech companies this week will arrive after JPMorgan Chase & Co.
JPM,
Chief Executive Jamie Dimon said U.S. consumers and businesses “generally remain healthy,” while Citigroup Inc. expects a “mild recession” in the first half of next year.
While AI development remains the north star for the tech industry and investors, analysts could start to dig deeper into short-term costs. The industry also hasn’t totally shaken off concerns about more cautious IT, cloud and digital-ad spending, with businesses still hesitant amid enduring anxieties about a weaker economy up ahead. And Barron’s this month pointed to recent warnings from lower-profile tech companies. Then, there’s deeper regulatory scrutiny, as governments struggle to keep a lid on the size of the industry’s biggest players.
Still, Wall Street’s expectations could be worse. Alphabet reports as it faces a bigger antitrust battle with the government. But analysts expect decent search-driven ad revenue and a better showing from YouTube. And at Meta, some analysts expect ad sales to recover as well.
Some analysts on Wall Street also expected solid results from Microsoft — which has invested in ChatGPT creator OpenAI — as trends in its Azure cloud business even out. The company last week, after months of wrangling with regulators, closed its deal to buy video-game maker Activision Blizzard.
At Amazon, meanwhile, analysts will be watching for forecasts on holiday-season spending and a rebound e-commerce overall, a possible improvements in its cloud business, and any comments on the FTC’s lawsuit against it. Analysts expect minimal financial impact, for now, on Amazon, and an uphill battle for the agency, which has accused the online retailer of “exploiting its monopoly power” while raising prices and making service worse.
This week in earnings
Elsewhere in the tech industry, Intel Corp.
INTC,
and International Business Machines Corp.
IBM,
report this week. So does streaming platform Spotify Technology
SPOT,
which has been trying to expand beyond music and podcasts as steady profit remains hard to come by. Toy-makers Mattel Inc.
MAT,
and Hasbro Inc.
HAS,
also release earnings, as Mattel’s momentum from the “Barbie” movie runs up against questions about toy demand and other efforts to turn classic toys into content.
Results are also due from General Electric Co.
GE,
3M Co.
MMM,
and Boeing Co.
BA,
Coca-Cola Co.
KO,
Snap Inc.
SNAP,
and Chipotle Mexican Grill Inc.
CMG,
also report. For the week ahead, 160 S&P 500 companies will report results, including 12 from the Dow, according to FactSet.
The calls to put on your calendar
UPS, GM, Ford and the unions reshaping them: Package-deliverer United Parcel Service Inc., which reports results on Thursday, just struck a deal with the Teamsters union. Auto-makers General Motors Co. and Ford Motor Co., which report Tuesday and Thursday respectively, are still locked in negotiations with the United Auto Workers.
Those discussions have been part of a bigger push from labor across the nation’s supply chains, following initial deals struck with longshoremen and rail workers over the past year, as workers fight for a cut of big pandemic-era profits reaped by their employers and businesses and businesses and consumers worry about delays in shipments and higher prices.
The UAW on Friday said it had made inroads on talks with the Big Three auto-makers. But remarks from executives, particularly at GM
GM,
and Ford
F,
could still add more drama to those negotiations, as both companies also deal with concerns about electric-vehicle production and the impact of higher interest rates on sales.
And while UPS
UPS,
predicted minor cost increases from the Teamsters deal as it leans on tech efficiencies, it will report as analysts seek more clues on what kind of business it may have lost in the sometimes-tense negotiations with the union. And with demand for package deliveries from shoppers and retailers still weaker as higher prices force more restrained spending, other shipping companies have warned that they’re not out of the freight recession yet.
The numbers to watch
Visa, Mastercard and credit-card spending: Credit-card giants Visa Inc.
V,
and Mastercard Inc.
MA,
report results on Tuesday and Thursday, respectively. The two rivals will report after shares of Discover Financial Services
DFS,
took a hit after executives there warned of “some indications of stress” among customers and set aside more money to cover loan losses. While the three companies aren’t exactly the same — Visa and Mastercard don’t actually issue their own cards — Wall Street may still be looking for read-throughs, amid worries that the Fed’s higher interest rates could crimp consumer spending.
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