Big Tech Giants Rescuing S&P 500 Earnings Amid Market Concerns

In recent times, many worry about the stock market. People look to the earnings season for some good news. They hope Big Tech companies can provide it.

The big technology and internet firms in the U.S. have been making profits like they did two years ago. This was when the pandemic caused a surge in sales of digital services and electronic devices. Now, people expect these companies to make up for the slow earnings in industries like energy and health care.

The five largest companies in the S&P 500 Index are Apple, Microsoft, Alphabet, Amazon.com, and Nvidia. They make up about a quarter of the index's total value. Analysts estimate that their earnings will increase by 34% compared to last year.

The overall S&P 500 is not looking as strong. They expect its profits to stay about the same. Without these five big companies, the profits would drop by about 5%.

Gary Bradshaw, who manages investments at Hodges Capital Management, says, "It’s very important for the big tech stocks to deliver.” He thinks that the big tech companies have what it takes to lead the market in the final part of the year.

In the past few weeks, rising interest rates have made the markets shaky. This has made people worry about a possible recession. Tech stocks have also faced some challenges. However, they are still performing better than the overall market.

Netflix and Tesla are going to announce their earnings soon. Other big tech companies like Alphabet, Microsoft, Amazon, and Meta Platforms will follow. Apple and Nvidia will announce their earnings in early November.

Mike Bailey, the research director at FBB Capital Partners, says that after good earnings in the second quarter, they need to see the same in the third quarter. He thinks that the rest of the market will follow the lead of big tech companies.

It's good for investors to be hopeful. In the past hundred years, the S&P 500 has usually gone up during earnings season.

However, there could be a problem. The stock prices of Alphabet and Amazon have gone up by more than 50% this year. Apple and Microsoft have also gone up by almost 40%. This means that people might already expect good news from them.

The stock market values of big tech companies are still quite high. Apple and Microsoft, for example, are priced at about 27 and 29 times their estimated earnings. This is much higher than the average over the past ten years. For the whole S&P 500, the figure is around 18.

Kim Forrest, who is in charge of investments at Bokeh Capital Partners, says that when share prices are high, companies need to make strong earnings. They have to do this to keep investors interested.

So, the big tech companies have a big role to play this earnings season. They are expected to deliver strong profits. People are keeping a close eye on them to see if they live up to these expectations.

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