Investors should expect the stock market to remain volatile in the upcoming week, given the plethora of big-tech earnings on the cards. Some of the largest companies in the world, including Apple (NASDAQ: AAPL), Alphabet (NASDAQ: GOOG), Amazon (NASDAQ: AMZN), ExxonMobil (NYSE: XOM), Starbucks (NASDAQ: SBUX), and Ford (NYSE: F), are expected to report earnings for the quarter ending in December 2022.
Last week, tech giants such as Microsoft (NASDAQ: MSFT) and Intel (NASDAQ: INTC) reported quarterly results, which underwhelmed investors. While Microsoft reported its slowest revenue growth in the last six years, Intel missed revenue and earnings forecasts by a wide margin.
However, Tesla (NASDAQ: TSLA) surprised Wall Street forecasts, and the stock has already surged by 46% in the past month. Tesla stated while lower automobile prices drove profit margins lower, demand for its portfolio of battery-powered vehicles gained significant momentum.
During the earnings call, CEO Elon Musk confirmed, “Thus far in January we’ve seen the strongest orders year-to-date than ever in our history. We’re currently seeing orders of almost twice the rate of production.”
Analysts expect a tough macroeconomic environment to negatively impact big tech earnings in Q4 as companies continue to wrestle with tepid sales and rising interest rates. In the last year, interest rate hikes have driven valuations of tech companies lower, who increased balance sheet debt to finance their expansion plans aggressively in the past decade. Investors are worried that the rising cost of debt to hurt the profit margins of companies across sectors in the next 12 months.
The adjusted earnings per share for Meta Platforms (NASDAQ: META) are forecast to fall by 38% year over year to $2.25 on the back of lower ad sales and losses attributed to the metaverse business. Comparatively, Amazon’s earnings might nosedive by 83% year over year to $0.21 despite a 6% growth in revenue, while Wall Street forecasts Alphabet's earnings to fall by 13.4% in Q4.
The jobs market remains in the spotlight
One macro indicator which will be closely watched is the U.S. Labor Department’s JOLTS (Job Openings and Labor Turnover Survey) report for the month of December. The JOLTS report will be published on Wednesday, and its tracks job openings, hires, resignations, and separations for the last month. Payroll provider ADP will also publish its NEP or National Employment Report, which tracks private-sector payroll growth for January.
Next, the stage is set for the nonfarm payrolls report, which will be published by the Labor Department on Friday. Economists forecast the U.S. economy to add 185,000 jobs in January, lower than the 223,000 additions in December. It will also mark the slowest growth since the loss of 306,000 jobs back in December 2020. The unemployment rate might rise to 3.6% compared to a multi-decade of 3.5% right now.
Central banks and policy meetings
The policymakers at the Federal Reserve will conduct a two-day meeting of the FOMC (Federal Open Market Committee) while deciding on the decision of interest rate hikes this Wednesday.
Market participants expect the Fed to raise interest rates by 25 basis points, increasing benchmark rates to 4.5%-4.75%.
An Investopedia report states, “The European Central Bank (ECB) and the Bank of England (BoE) will hold policy meetings on Thursday. ECB policymakers are expected to raise interest rates by 50 bps in their ongoing effort to tame record-high inflation in the eurozone, which hit a recent peak of 10.6% in October. BoE officials are also expected to hike rates by 50 bps, as the U.K. grapples with an economic slowdown and the highest inflation rate in over 40 years.”
Disclaimer: The writer is an experienced financial consultant who writes for Finscreener.org. The observations he makes are his own and are not intended as investment or trading advice.
