Big tech stocks will be key to the current rally: Morning Brief

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Thursday, October 27, 2022

Today’s newsletter is from Jared Blikre, a market-focused reporter at Yahoo Finance. Follow him on Twitter @SPYJared. Read this and other market news wherever you are with Yahoo Finance app.

Major indexes are rallying for the seventh time this year, potentially emerging from a bear market that lasted nearly six months. The Dow (^DJI), Nasdaq Composite (^IXIC), S&P 500 (^GSPC) and even the Russell 2000 (^RUT) are each up 9% to 11% from mid-October lows as bulls flash the first signs of greed since August.

Mega cap earnings this week will determine if the rally continues. The top 20 constituents of the S&P 500 by market capitalization represent 4% of the index by number but nearly 40% of the index by weight. This outsized representation gives each mega cap an outsized effect on the market.

So far, it looks like the mega highs could be hampering the rally. This week, poor results from Alphabet (GOOG, GOOGL), Microsoft (MSFT) and Meta Platforms (META) weighed on major indices. Google’s parent company closed down 9.1% on Wednesday, marking its worst day since pandemic lows in 2020. Apple (AAPL) reports after the closing bell today.

Eight of the top 20 S&P 500 companies lost more than $100 billion in market capitalization on Wednesday — with Microsoft down $780 billion, Alphabet $650 billion and Meta Platforms down $555 billion. Nvidia, Apple and Amazon have each lost over $400 billion since the start of 2022.

Apple is expected to report quarterly revenue of $88.6 billion, including $15.7 billion from Greater China. With all the hype surrounding the iPhone 14, it’s easy to forget that multinationals like Apple are also suffering from the strong US dollar (DX-Y.NYB).

Meta initially fell 14% after the bell on Wednesday after lowering its sales forecast for the current quarter – in part due to currency headwinds.

The story continues

Overall, the Technology, Communication Services and Consumer Discretionary sectors are each down around 30%. At the same time, the energy and health sectors are booming.

Exxon Mobil (XOM) added more than $190 billion to its market cap, while Chevron (CVX) added nearly $120 billion. Pharmaceutical company Eli Lilly & Co. (LLY) and insurer UnitedHealth (UNH) added about $80 billion and $40 billion, respectively, this year. For the broad rally to continue, they will likely need help from mega-cap tech stocks.

What to watch today

Economy

• 8:30 a.m. ET: Annualized GDPquarter-on-quarter, 3Q Y (2.4% expected, -0.6% before)

• 8:30 a.m. ET: Durable Goods OrdersSeptember Preliminary (0.6% expected, -0.2% in previous month)

• 8:30 a.m. ET: Personal consumptionquarter over quarter, 3rd quarter (1% expected, 2.0% before)

• 8:30 a.m. ET: Durable goods excluding transportSeptember Preliminary (0.2% expected, 0.3% in previous month)

• 8:30 a.m. ET: GDP price indexquarter over quarter, 3Q Y (5.3% expected, 9.0% before)

• 8:30 a.m. ET: Orders for capital goods excluding defense excluding aircraftSeptember Preliminary (0.2% expected, 0.3% in previous month)

• 8:30 a.m. ET: Basic PCEquarter over quarter, 3rd quarter (4.6% expected, 4.7% before)

• 8:30 a.m. ET: Initial jobless claimsweek ended October 22 (225,000 expected, 214,000 the previous week)

• 8:30 a.m. ET: Continuing claimsweek ended October 15 (1.385 million in previous week)

• 11:00 a.m. ET: Kansas City Manufacturing IndexOctober (-2 expected, 1 the previous week)

Earnings

Amazon.com (AMZN), Apple (AAPL), Altria (MO), Ares Management (ARES), AutoNation (AN), Caterpillar (CAT), Capital One (COF) Comcast (CMCSA), CubeSmart (CUBE), Gilead Sciences (GILD), Hertz Global (HTZ), Honeywell (HON), Intel (INTC), Keurig Dr Pepper (KDP), Mastercard (MA), McDonald’s (MCD), Merck (MRK), Northrop Grumman (NOC), Oshkosh ( OSK), Overstock.com (OSTK), Pinterest (PINS), Royal Caribbean (RCL), S&P Global (SPGI), Shopify (SHOP), Southwest Air (LUV), T. Rowe Price (TROW), Twitter (TWTR) , T-Mobile (TMUS), Willis Towers Watson (WTW)

Yahoo Finance Highlights

SEC approves executive compensation clawback rule after ‘material error’ in financial statements

Meta Earnings Misses on Revenue, Offers Q4 Guidance Lighter Than Expected

Spotify stock plunges another 13% after earnings as investors digest falling margins

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