Stocks jumped higher this morning after Facebook-parent Meta (NASDAQ: FB) beat quarterly earnings estimates last evening. FB soared 14% through noon, lifting the S&P in the process. But the broader market index remains below yesterday’s high, which was set prior to an intraday bearish reversal.
And unless the S&P can close significantly higher heading into next month, the market may continue to chop lower toward key support at the 2022 lows despite a generally positive earnings season.
“It’s been a pretty good earnings season and that is supportive for the equity market,” said Crossmark Global Investments strategist Victoria Fernandez.
With Apple (NASDAQ: AAPL) and Amazon (NASDAQ: AMZN) both set to report earnings after the closing bell today, many investors are hoping for a pair of market-saving “beats.”
“Amazon should benefit from improved operational efficiencies at its new Fulfillment Centers, the closing of some of its physical retail locations, and the lapping of Covid-related labor shortages,” said Citigroup analyst Ronald Josey, who pegged AMZN with a “buy” rating and price target of $4,100. AMZN currently trades for roughly $2,820, meaning that Josey sees over 46% of upside for the stock from here.
Apple, meanwhile, is expected to announce a $90 billion buyback program today when it reports earnings.
“Apple’s free cash flow and buybacks have definitely supported the company to a larger degree than its peers,” explained Bob Shea, chief investment officer at Trim Tabs Asset Management.
“Everything is coming under pressure right now, and investors are looking for names with high-quality and sustainable free-cash-flow profitability. Apple is at the top of that list.”
Investors will applaud successful quarters (and buyback programs) from AMZN and AAPL, but they’ll be more interested in these companies’ forward guidance than anything else. Strategists up and down Wall Street expect a US recession within the next few years. Some, like those at Deutsche Bank, believe we will see one by 2023.
It’s said that stocks generally look forward 6 months. If that old adage holds true, bulls are in for some painful months of trading in Q3 and Q4.
But we’re not there quite yet. More importantly, stocks have already scorched lower over the last few weeks.
The three major indexes are practically screaming for a bear market rally as a result, especially if AAPL and AMZN earnings impress.
But if either company cuts its 2022 projections, the recent bout of selling may only intensify.
AMZN is clinging on near key support at $2,700. AAPL is faring better, but also could fall below a level of support if earnings aren’t received well.
We mentioned earlier in the week that stocks were facing a true “make or break” moment. Today’s the final day of Big Tech earnings. At tomorrow’s open, we’ll likely find out whether May is going to be a bullish or bearish affair.
And, given the market’s recent volatility, the next rally/correction could be a big one, regardless of what the US economy’s longer-term prospects look like.
