Quarterly Outlook
Macro Outlook: The US rate cut cycle has begun
Peter Garnry
Chief Investment Strategist
Investment and Options Strategist
Summary: Last week's market correction and sector rotation from tech to midcaps have set the stage for a pivotal earnings week, with key reports from Tesla, Alphabet, Visa, IBM, and ServiceNow. Investors will be closely watching these earnings for signs of a potential tech sector rebound or further market volatility amidst evolving political developments.
Last week marked a notable shift in the financial markets as major indices began a corrective phase, yet managed to stay within the broader bullish trend. The S&P 500 (SPX) and Nasdaq 100 (NDX) both recorded bearish engulfing candles on their weekly charts, signaling potential continued downside. Despite this, the overall bullish trajectory remains intact for the time being, suggesting that this correction could be a temporary pullback rather than a full reversal. Interestingly, the Russell 2000, which tracks mid-cap stocks, had a phenomenal run over the last two weeks. Although it retreated slightly late last week, it remained positive for the week, in contrast to the SPX and NDX.
A significant political development that could weigh on market sentiment in the coming week is President Biden's announcement of his withdrawal from the presidential race last night (Sunday evening). This sudden move introduced a layer of uncertainty, prompting investors to reassess the political landscape's potential impact on economic policy and market stability. The full impact of this development is still unfolding, and it could lead to increased volatility as markets react to the implications for future fiscal and regulatory policies.
Adding to the complexity of the market dynamics was a noticeable rotation from tech stocks to midcaps. Last week saw investors pulling back from high-flying tech giants and reallocating their capital to midcap stocks, which are often perceived as less risky during periods of uncertainty. This rotation raises the question of whether tech can regain its leadership and turn the tide, especially with several key tech earnings on the horizon.
As we look ahead, the upcoming earnings reports from major tech companies like Alphabet (GOOGL), Tesla (TSLA), Visa (V), IBM, and ServiceNow (NOW) will be critical in determining if the sector can reverse last week's trend. Strong earnings could restore confidence and drive a resurgence in tech stocks, while disappointing results might further entrench the rotation into midcaps and other sectors. The market is at a pivotal juncture, and these earnings will play a crucial role in shaping investor sentiment in the weeks to come.
Tesla is set to release its quarterly earnings report on Tuesday, July 23, 2024, after the market closes. Here are some key expectations and forecasts:
These forecasts suggest that while Tesla may encounter some short-term difficulties, its long-term growth outlook remains strong.
Alphabet Inc., Google’s parent company, is set to release its quarterly earnings report on Tuesday, July 23, 2024, after the market closes. Here are some key expectations and forecasts:
These expectations indicate positive growth for Alphabet, particularly in cloud services and AI developments.
Visa is set to release its quarterly earnings report on Tuesday, July 23, 2024, after the market closes. Here are some key expectations and forecasts:
These forecasts suggest robust growth for Visa, emphasizing its expanding payment processing capabilities and strategic advancements in digital payments and fintech.
IBM is set to release its quarterly earnings report on Wednesday, July 24, 2024, after the market closes. Here are some key expectations and forecasts:
These forecasts paint a mixed picture for IBM, highlighting a slight dip in EPS but a small revenue increase. Investors will be looking for signs of sustained growth in IBM’s strategic areas, particularly cloud and AI, as well as insights into how the company’s consulting and technology services are evolving. A strong performance in these areas could reinforce IBM’s position in the tech sector, while any shortcomings might raise concerns about its growth trajectory.
ServiceNow is set to release its quarterly earnings report on Wednesday, July 24, 2024, after the market closes. Here are some key expectations and forecasts:
These expectations suggest robust growth for ServiceNow, with significant gains in revenue and earnings. The focus on expanding cloud services and leveraging new technologies positions ServiceNow well in the competitive landscape.
The intersection of political developments, market corrections, and sector rotations creates a complex backdrop for investors. As we await the upcoming tech earnings, the market remains on a knife-edge, with the potential for significant movements in either direction. The ability of tech stocks to turn the tide will be closely watched, and their performance will undoubtedly have far-reaching implications for the broader market. Strong earnings reports from key companies like Tesla, Alphabet, Visa, IBM, and ServiceNow could restore confidence and drive a resurgence in tech stocks, while disappointing results might further entrench the rotation into midcaps and other sectors. Investors will need to stay vigilant and adaptable as the earnings season unfolds and the market navigates through this pivotal period.