Big Tech Fails to Boost US Stocks Before Earnings: Markets Wrap

(Bloomberg) — Stocks wavered ahead of major central bank decisions, key economic data and earnings from four megacaps worth nearly $10 trillion.

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Following a big rotation that drove the Nasdaq 100 to the brink of a correction, big tech climbed on Monday. Results from Microsoft Corp., Meta Platforms Inc., Apple Inc. and Amazon.com Inc. will be key after an underwhelming start of the megacap reporting season. Federal Reserve officials are on the verge of lowering borrowing costs within months, a move Jerome Powell may signal Wednesday as the risks grow of imperiling a solid but moderating job market.

“The Fed and tech earnings will have the spotlight for the week,” said Paul Nolte at Murphy & Sylvest Wealth Management. “The future direction of interest rates should be clearer after the press conference. Big tech can answer whether investor’s expectations for still high growth rates is warranted.”btdy

The S&P 500 hovered near 5,450. A Bloomberg gauge of the “Magnificent Seven” megacaps gained 0.7%. The Russell 2000 of smaller firms fell 0.8%. Tesla Inc. jumped on a bullish Morgan Stanley call. McDonald’s Corp. gained as analysts said US comparable sales were “better than feared.”

Not a whole lot of action in the bond market, with US yields edging mildly lower. Treasuries headed toward a third month of gains – the longest winning run since 2021. Bitcoin climbed after Donald Trump expanded his pro-crypto agenda. A spate of junk-rated issuers including Royal Caribbean Cruises and Seaworld kicked off debt sales Monday.

Elsewhere, rate decisions in Japan and the UK will also be closely watched this week — the former for a hike, the latter for a cut.

“We maintain our view that the US economy is on pace for a soft landing and advise investors to maintain a full allocation to US equities,” said David Lefkowitz at UBS Global Wealth Management. “It’s almost impossible to know if the worst of the recent market pullback is over, but we continue to believe the equity market backdrop is favorable due to resilient growth, falling inflation, likely Fed rate cuts, and AI spending.”

Companies in the S&P 500 that beat Wall Street estimates on sales and earnings outperformed the US stock benchmark by 2.4 percentage points the subsequent day, the strongest since the fourth quarter of 2018, according to Bank of America Corp.’s Savita Subramanian. On the flipside, investors are punishing companies that missed earnings estimates less.

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“This suggests that recent themes driving surprises may be less crowded as themes beyond AI emerge,” the strategist wrote.

To Morgan Stanley’s Michael Wilson, a dimmer outlook for US corporate earnings is likely to hurt stocks that are tied to the economy, as investors worry about the impact of falling inflation on pricing power.

The strategist — who was among the biggest bearish voices on US stocks last year — said that a gauge that measures profit upgrades versus downgrades has turned weaker, as is typical for this time of the year. That’s being driven primarily by so-called cyclical sectors.

RBC Capital Markets strategist Lori Calvasina also said trends in earnings revisions don’t yet support a further rotation in market leadership.

Corporate Highlights:

• Apple Inc.’s upcoming artificial intelligence features will arrive later than anticipated, missing the initial launch of its upcoming iPhone and iPad software overhauls but giving the company more time to fix bugs.

• Reckitt Benckiser Group Plc plunged to an 11-year low on Monday after a verdict against Abbott Laboratories intensified concerns over infant formula lawsuits faced by both companies.

• Alibaba Group Holding Ltd. unveiled a plan to earn more service fees from merchants.

Key events this week:

• Eurozone economic confidence, GDP, consumer confidence, Tuesday

• US JOLTS job openings, consumer confidence, Tuesday

• Microsoft earnings, Tuesday

• China manufacturing PMI, non-manufacturing PMI, Wednesday

• Eurozone CPI, Wednesday

• Bank of Japan policy decision, Wednesday

• US ADP employment change, Wednesday

• Fed rate decision, Wednesday

• Meta Platforms earnings, Wednesday

• China Caixin manufacturing PMI, Thursday

• Eurozone S&P Global Eurozone Manufacturing PMI, unemployment, Thursday

• US initial jobless claims, ISM Manufacturing, Thursday

• Amazon, Apple earnings, Thursday

• Bank of England rate decision, Thursday

• US employment, factory orders, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 fell 0.1% as of 11:11 a.m. New York time

• The Nasdaq 100 was little changed

• The Dow Jones Industrial Average fell 0.3%

• The Stoxx Europe 600 fell 0.2%

• The MSCI World Index was little changed

• Bloomberg Magnificent 7 Total Return Index rose 0.7%

• The Russell 2000 Index fell 0.8%

Currencies

• The Bloomberg Dollar Spot Index rose 0.3%

• The euro fell 0.3% to $1.0822

• The British pound fell 0.1% to $1.2854

• The Japanese yen fell 0.1% to 153.98 per dollar

Cryptocurrencies

• Bitcoin was little changed at $67,989.88

• Ether rose 1.8% to $3,319.5

Bonds

• The yield on 10-year Treasuries declined two basis points to 4.17%

• Germany’s 10-year yield declined four basis points to 2.36%

• Britain’s 10-year yield declined five basis points to 4.05%

Commodities

• West Texas Intermediate crude fell 1.5% to $76.01 a barrel

• Spot gold fell 0.3% to $2,380.85 an ounce

This story was produced with the assistance of Bloomberg Automation.

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