America’s June 30 quarterly reporting season accelerates this week with 138 S&P 500 companies (including seven Dow 30 components) scheduled to release results.
Away from the business and political factors, it's time for the bread and circuses this week with the start of the Paris Olympics midweek and then the opening ceremony on Friday night (Paris time).
Two of Wall Street’s megacaps will star this week – Alphabet and Tesla.
Last week saw mini-megacap Netflix top all forecasts for its June quarter, but the shares sold off on Friday. What fate lies ahead for two even bigger techs – Alphabet and Tesla, which both report their June data after the closing bell on Tuesday?
Tesla has been rehabilitated by its supporters, even though car sales were weak (but not as weak as expected).
But Tesla’s recovery ended last week – Friday saw the shares lose 4% in the confused sell down and rotation. That took the week’s loss to 6.5%, but the shares are still up 32% in the past month. Alphabet shares rose by a fraction on Friday but lost 3.9% over the week. Its shares are up just under 1% in the last month.
The duo kick off results from the "Magnificent Seven" megacap group of stocks that have propelled markets since early 2023. Meta, Microsoft, and Apple report next week, as will Amazon. Nvidia reports later in August and is again the key report.
While big tech stocks have been leading the charge, Friday’s global outage due to a software problem from CrowdStrike for Microsoft products (but not Apple or Android) has the potential to boost investor worries about the sector’s stability.
The tech sector is projected to increase year-over-year earnings by 17%, and earnings for the communication services sector — which includes Alphabet and Facebook parent Meta — are seen rising about 22%. Such gains would outpace the 11% estimated rise for the S&P 500 overall, according to LSEG IBES forecasts.
Monday’s comments by Fed Chair Jay Powell boosted expectations for a September rate cut from the Fed, sparking a rotation into ‘value’ areas of the market that have struggled under tighter monetary policy.
The move out of tech accelerated this week, after a failed assassination attempt on Trump over the weekend appeared to boost his standing in the presidential race.
On top of this, semiconductor shares were hit hard after a report earlier this week said the United States was mulling tighter curbs on exports of advanced semiconductor technology to China. The Philadelphia SE semiconductor index has tumbled about 8% since last week.
FactSet’s John Butters wrote on Friday that after one and a bit weeks of the season, the results so far have been mixed.
"At this early stage, the second-quarter earnings season for the S&P 500 is off to a mixed start. On the one hand, the percentage of S&P 500 companies reporting positive earnings surprises is above average levels. On the other hand, the magnitude of earnings surprises is below average levels. At the sector level, a significant increase in earnings for the Financials sector is being partially offset by a substantial decrease in earnings for the Energy sector.
"As a result, the index overall is reporting higher earnings for the second quarter today relative to the end of last week and relative to the end of the quarter. In addition, the index is reporting its highest (year-over-year) earnings growth rate since Q4 2021.”
Amusingly, among the companies releasing results are a group of Paris-based luxury goods groups who look like they are slipping the figures out in the lead up to the Olympics so their managers and boards can go off and enjoy themselves (and the hundreds of millions of euros they have spent on sponsorships and PR).
LVMH (the biggest), Kering, Hermes, and Christian Dior are among the luxury names releasing their latest financials on Thursday and Friday. Judging by the weakish figures for Burberry and Hugo Boss last week, the companies may be wanting to see their figures swallowed by games publicity in France.
Several consumer giants report – Coca Cola, Nestle, Unilever, Colgate Palmolive, and Reckitt Benckiser. They will show how consumers have abandoned a lot of high-priced products – as PepsiCo revealed earlier this month.
GE and 3M also report – the latter will be examined for its costs associated with resolving the growing list of legal actions over what are called ‘forever chemicals’ that are highly polluting and dangerous.
Car giants, Ford and GM report – both will say they are still transitioning to an EV world but Ford last week said it would spend $2.3 billion expanding its facilities for its best-selling pick up – a huge version of its petrol-powered F-150.
In Germany, Daimler, the Mercedes maker, is down to report as well.
And some media and telco companies report – led by Comcast, Spotify, AT&T, and Verizon.
Miners, Newmont and Freeport McMoRan, also report.
Also among the companies releasing results this week are a group of major arms makers like Lockheed Martin, General Dynamics, and United Technologies. Ukraine and Gaza have been good for them.
