Genevieve Roch-Decter, CFA on LinkedIn: 🚨Big week ahead for earnings: - Tuesday: Tesla, Visa, UPS & GM -… (2024)

How stock markets have performed vis-a-vis their GDP. If you look at it, the US markets performed fairly well, despite relatively lower GDP growth. The reason: The top US companies make a good amount of money from outside the US. Ex: Apple, Google, Meta, Amazon, etc. With India, our top companies have more domestic exposure, hence we can see the correlation working out well - GDP Growth with that of Stock market returns.

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How big is too big?The GDP of U.S. in 2022 was $25.5 trillion and the current market cap of Apple is around $2.8 trillion as of May 30, 2023, approximately 11% of U.S. GDP. It might be even bigger than the “Standard Oil” in 1911. By the way, the combined market cap of Apple and Microsoft is around 20% of U.S. 2022 GDP.

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As the market continues on its rally, the next week will have many important points of data to look towards. Manufacturing and Service PMIs along with the consumer confidence index will give a fuller picture regarding inflation along with the health of the economy. However, more importantly, quarterly earnings for major companies such as Microsoft, Google, Amazon, and Boeing will help determine the future momentum of the market. It is important to keep in mind that investors already anticipate a weak quarter from these companies, which may help keep the upwards momentum due to lessened performance expecations.

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AI mania has caused stock prices to diverge from underlying fundamentals and presents an opportunity to sell.Analysts’ estimates for Apple and Microsoft’s free cash flow have been trending down for two years. If the current quarter forecast is in the ballpark, it will mark the transition from year-over-year FCF growth to decline for the two largest market cap stocks in the S&P 500. This significant downturn under the hood suggests that these two companies are performing more like mature cyclicals than growth stocks. Such does not bode well for the overall economy or the stock market which we believe is in the vicinity of a major top.

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U.S. markets are closed for the weekend, and trading will resume tomorrow. On Friday, Amazon had the biggest move in the technology giants group, with an 8% rally and breaking its 11-month high. Apple had a 7% weekly sell off, following a 5% slump on Friday, its fourth strait day of losses, and breaking its month low. Alphabet is the focus of our proprietary algorithm's buy recommendation this weekend. The recommendation is backed by three important indicators: the parabolic SAR, the stochastic oscillator, and the OBV. The technology giants group has seen a lot of movement this week, with Amazon's 8% rally and Apple's 7% weekly sell off. This weekend, Alphabet is the focus of our proprietary algorithm's buy recommendation.

Mark your calendars! ️ Next week brings a flurry of activity in Q1 earnings season with reports from tech leaders like Tesla, Meta, Microsoft, and Amazon. Don't miss key economic data on Friday either, including housing figures, the Q1 GDP report, and the latest inflation print. #EarningsSeason #Macroeconomics#WeeklyEconomicCalendar #FlahartyAssetManagement #LPLFinancial

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“Inflation is still too high” these were the words of Fed Chair 🏦 Jerome Powell last week. These words triggered the downward movements 📉 we saw in equity markets last week. These words caused the yield in 10 year Treasury’s (US government bonds) to rise to 5%, the highest since the financial crisis in 2007. This has dampened hopes that we would see interest rates starting to lower by the end of year. This week, we look to the tech sector 👩💻🧑💻 as companies such as Amazon, Meta, Microsoft & Alphabet announce their earnings reports 💰 for the quarter.

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Jerome Powell, the Federal Reserve Chair, has signaled that immediate interest rate cuts are unlikely as the Fed seeks further proof of declining inflation. Despite a softer stance in their latest meeting, the Fed is maintaining borrowing costs at their highest in 23 years, stopping short of signaling further hikes. This announcement led to a downturn in U.S. stocks as investors adjust their rate cut expectations and await earnings reports from major tech players like Apple, Amazon, and Meta. Market analysts suggest that the Fed is cautious, aiming to avoid premature policy easing that might reignite inflation.Investors are now watching tech giants as they prepare to release their earnings, with particular attention on the performance of Amazon's AWS, Apple's iPhone sales, and Meta's ad revenue. Additionally, tech firms are under scrutiny for their anticipated spending on AI development. In other corporate news, Elon Musk has announced a potential move for Tesla's incorporation to Texas, pending shareholder votes. This follows a Delaware court ruling against his substantial compensation package. Lastly, oil markets are observing slight price increases ahead of an OPEC+ meeting, with no major production changes anticipated.