U.S. equities are under pressure on Monday, with the Dow Jones Industrial Average falling more than 100 points at its morning low as global bond yields drifted higher. With numerous tech earnings due this week, the market is bound for some fireworks.
It’s also badly overdue for a reversal. On the relative strength indicator basis, stocks have never been more overbought than they are now. Just 18 trading days into the year, and the S&P 500 has already surpassed the average Wall Street strategist target of 2,854 for year-end 2018.
This is the context as we head into the heart of the fourth-quarter reporting season with mega-cap tech stocks set to report, the Federal Reserve holdings a policy meeting and the jobs report incoming on Friday.
Big tech earnings have been the primary motivators of the market’s melt-up. But with options traders bracing for volatility — either up or down — nearly $200 billion in overall market value is at risk. Here are the five biggies to watch for:
Tech Earnings to Watch: Microsoft (MSFT)
Microsoft Corporation (NASDAQ:MSFT) shares are pulling back from a push to record highs on Monday, a parabolic end to an extension higher that started in late December and resulted in a gain of more than 10%.
Shares have been moving relentlessly higher, without so much as a touch of the 50-week moving average since the summer of 2016.
The company will report results on Jan. 31 after the close. Analysts are looking for earnings of 86 cents per share on revenues of $28.4 billion. When the company last reported on Oct. 26 earnings of 84 cents per share beat estimates by 12 cents on an 11.7% rise in revenues.
Tech Earnings to Watch: Facebook (FB)
Facebook Inc (NASDAQ:FB) shares are churning near recent highs as CEO Mark Zuckerberg announced a shift away from news to refocus on user-generated content.
This is expected to weigh on user metrics since it will discourage regular, repeated visits during the day. Deutsche Bank analysts believe, however, this will result in a company more focused on its role in society. Whatever that means.
The company will next report results on Jan. 31 after the close. Analysts are looking for earnings of $1.97 per share on revenues of $12.6 billion. When the company last reported on Nov. 1, earnings of $1.59 beat estimates by 31 cents per share on revenue growth of 47.3%.
Tech Earnings to Watch: Amazon (AMZN)
Amazon.com, Inc. (NASDAQ:AMZN) shares are the most resilient here, enjoying a straight-up vertical move out off the November-December grind. The result is a near-20% gain over the past month, an impressive rate of change even for a momentum darling like Amazon.
This as investors look past persistently weak retail margins as AWS continues to subsidize the company’s other initiatives. Like the indoor jungle “Spheres” that just opened at its Seattle HQ.
The company will next report results on Feb. 1 after the close. Analysts are looking for earnings of $1.83 per share on revenues of $59.85 billion. When the company last reported on Oct. 26, earnings of 52 cents per share beat estimates by 53 cents on a 33.7% rise in revenues.
Tech Earnings to Watch: Alphabet (GOOG)
Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) shares are up nearly 12% from their early December low and hasn’t suffered a touch of its 50-day moving average since late 2016.
The company’s ad words revenue, autonomous vehicles, and Google Assistant are powering a persistent bid. But the time is ripe for a bout of profit taking here as the increasing competitiveness of the “cloud” threatens to weigh on profitability.
The company will next report results on Feb. 1 after the close. Analysts are looking for earnings of $9.98 per share on revenues of $31.9 billion. When the company last reported on Oct. 26, earnings of $9.57 beat estimates by $1.17 per share on a 237% rise in revenues.
Tech Earnings to Watch: Apple (AAPL)
Apple Inc. (NASDAQ:AAPL) is rolling over here, threatening a breakdown out of a three-month consolidation range on reports of underwhelming iPhone X demand amid high prices and saturation in the upper end of the smartphone market.
Moreover, the latest is that Apple will launch a cheaper, LCD-based iPhone 9 this year to address the problem. That could weigh on average selling prices.
The company will next report results on Feb. 1. Analysts are looking for earnings of $3.82 per share on revenues of $87 billion. When the company last reported on Nov. 2, earnings of $2.07 beat estimates by 20 cents on a 12.2% rise in revenues.
Anthony Mirhaydari is the founder of the Edge (ETFs) and Edge Pro (Options) investment advisory newsletters. Free two- and four-week trial offers have been extended to InvestorPlace readers.
