Megacap Tech Earnings in Focus as Fed Enters Blackout

S&P 500 OUTLOOK: NEUTRAL

• The U.S. central bank goes into its blackout period this weekend ahead of the November FOMC meeting
• With no Fed officials slated to speak in the coming days, monetary policy could take a back seat to corporate earnings
• Alphabet, Microsoft, Meta Platforms, Apple and Amazon’s financial results will take center stage next week. The market’s reaction to their numbers may set the trading tone for the S&P 500 and Nasdaq 100

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In recent days, hawkish Fedspeak has consumed the financial news cycle and sucked all the oxygen out of the equity market, but the U.S. central bank will enter its blackout period this weekend, a specific timeframe in which policymakers cannot speak publicly or give interviews before an upcoming FOMC meeting. This will give investors the opportunity to shift their focus to other important catalysts, such as the current earnings season, rather than the outlook for monetary policy.

Next week, several megacap companies with a large footprint in the S&P 500 and Nasdaq 100 are scheduled to announce their results. Given their high weighting in both benchmarks, the market reaction to their reports could trigger volatility and set the trading tone on Wall Street. In terms of the most important reports to keep an eye on are those from Alphabet (GOOGL), Microsoft (MSFT), Meta Platforms (META), Apple (AAPL), and Amazon (AMZN).

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If these heavy hitters manage to deliver solid numbers and offer constructive forward-looking commentary, selling pressure on equities could begin to ease, boosting sentiment and risk appetite. This scenario may lift both the S&P 500 and Nasdaq. However, this may be a tall order ask for some of these tech firms due to strong macroeconomic headwinds, including sky-high inflation, slowing economic activity and tightening financial conditions.

In any case, Snap’s (SNAP) disastrous financials, which sent shares of the social media firm plunging nearly 30% on Friday, could be a harbinger of cloudy skies for businesses that derive some or most of their revenues from selling digital advertisement. This could be a huge problem for Meta and, to a lesser extent, Alphabet, Google’s parent company.

Meanwhile, Microsoft, Apple and Amazon could be exposed to weaker demand on the back of heightened recession risks. It is important to point out that consumers, whose purchasing power has been severely eroded by elevated inflation, and businesses contending with an uncertain future, have been reducing spending of lately, reinforcing the negative outlook for Corporate America.

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However, with investors hedged to the teeth and prepared for the worst, most of “the bad” has already been discounted. This means that the market will need a major negative surprise (train wreck of results) to sell off. On the other hand, a modest miss on earnings and guidance may not lead to a widespread rout, but instead spark a relief rally, amplified by light positioning and thin liquidity.

The following table shows when Alphabet, Microsoft, Meta Platforms, Apple and Amazon will release their financial results and what Wall Street anticipates.

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—Written by Diego Colman, Market Strategist for DailyFX