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Big tech earnings: What to expect from Q3 results

Investors will be closely watching third quarter earnings from the big tech companies. Data from Bloomberg Intelligence shows that the big five - Apple (APPL), Microsoft (MSFT), Amazon (AMZN), Nvidia (NVDA), and Alphabet (GOOG,GOOGL) - are expected to show an average 34% year-over-year jump in earnings. Yahoo Finance Senior Business Reporter Ines Ferre joins to break down the potential performance of these companies and what investors should pay attention to.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Video transcript

RACHELLE AKUFFO: Well, investors looking for a rush of good news this earnings season have a particular sector in focus, Big Tech. Now, the five biggest companies on the S&P 500, that's Apple, Microsoft, Alphabet, Amazon, and NVIDIA, are behind about a quarter of the benchmark's market cap. Now, the hope is that they'll pick up the slack from other sectors that may still be mired in an earnings slump. Joining me now with more on this is Ines Ferre. Ines, what are you watching?

INES FERRE: Yeah, Rachelle. So those five stocks that you just mentioned, they have been leaders this year. And they continue to be leaders. And they're expected to be leaders throughout this earnings season. We wanna show you a chart right now where you can see their earnings. Those five stocks are expected to on average show a jump of 34% year over year.

Now, as a whole, the S&P 500 earnings expectations is expected to be flat. But without those five mega caps that you just mentioned, earnings on average for the S&P 500 companies would be down about 5%. I wanna show you on our interactive the outperformance that we have seen when it comes to technology, consumer discretionary, which, by the way, houses stocks like Amazon and also Tesla, communication services, a 41% year to date.

Now, we did see the 10-year Treasury yield going higher, as you just mentioned, with your previous guest. But we have seen a little bit of a slippage when it comes to some of these tech names. But nonetheless, I mean, a huge outperformance for the year.

Also keep in mind that a lot of these companies-- I'm gonna pull up the NASDAQ 100 chart here so you can see year-to-date chart here of the mega-caps on the left-hand side of the screen. Keep in mind that a lot of these companies, these tech companies, last year were tightening their belts. They were either slowing their hiring. Some of them had layoffs.

We did see that the expectation of a recession last year was making them tighten their belt. And a lot of these companies have a lot of cash on hand. And cash right now is earning interest. Now, as far as what this week is expected, we are expected to get Netflix, Tesla this week. Also next week, we have a chart for you showing you some of the names that we're expecting, Google, Amazon, and Microsoft, and also Meta.

In November, beginning of November, we're gonna get Apple. And then we will get NVIDIA. And look, the expectations are still high for these companies. One of the challenges may be that most of the good news is already baked in to their performance year to date that you have seen. And perhaps investors may sell the news. We'll have to wait and see.

But, I mean, NVIDIA up 214% year to date. Amazon up more than 57% year to date. Alphabet 57%. When we started this year we really didn't expect this huge rally that we have seen in this leadership-- in this leadership, which is expected to continue on for the S&P 500. Rachelle.

RACHELLE AKUFFO: It's true. I mean, we know that NVIDIA has pretty much been the hero this year in that surprise. But even Meta, this time last year, no one was thinking that they'd see the kind of gains that they would see year to date as well.

You know, it started off with that announcement of the year of efficiency. Investors bought into it. And they just seem to be thriving here. Do you think Meta has perhaps a bigger hurdle to overcome than NVIDIA, which has the sort of clear market when it comes to generative AI?

INES FERRE: Yeah. And certainly, Meta, which had its strategy last year-- you'll remember at the beginning of last year or part of last year, which was the metaverse and all of that investment that was going to go into that. And then they really pivoted.

And they also cut staff as well. I mean, so they really tightened their belt last year and really came into this year with a different perspective. But it has been quite a surprise for Meta as far as the performance that we've seen with the stock. And Meta has in the past done this before where you've seen the stock go down sharply, and then it has risen up again.

RACHELLE AKUFFO: Indeed. We'll always keep an eye on that one. Thank you for getting us up to speed. Our very own, Ines Ferre. Thanks so much.

INES FERRE: Thanks.