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With the onset of the second quarter’s earnings season, market operators’ focus momentarily shifts from macroeconomic movers to data released by listed companies.
However, never before has the evaluation of these two areas of interest been so closely intertwined, as attempts are made to quantify the intensity of a potential global slowdown – even prospectively with estimates for the coming months – through the evidence of corporate activities.
The first signs of recession have been recorded in the Eurozone and some countries of the macro area, yet the United States is being watched with keen interest, as Main Street and Wall Street represent the global economic and financial beacon: in particular, analysts want to understand whether Big Tech stocks can return to the leadership role they had long held before the onset of the bear market.
Earnings season and stock market performance of the Tech Sector
The Nasdaq, following the lead of the FAANG stocks – an acronym that combines the initials of Facebook (now Meta), Amazon, Apple, Netflix, and Google (now Alphabet) – led the rises in the US stock market and its international counterparts to the peaks of late 2021.
However, with the onset of the 2022 bear market, the tech stock basket began to significantly underperform other benchmarks until the first quarter of the year. From that point forward, in fact, the Nasdaq reclaimed the scepter of the best performer in the equity sector, achieving a performance exceeding 40% in the semester: industry insiders, in particular, are trying to understand whether this was a physiological realignment with other sectors, or whether in the coming months Big Tech may confirm a greater relative strength, also due to the profound upheavals that the use of Artificial Intelligence has brought especially in this market niche.
Corporate data of US Big Tech Companies
A careful observation of the main competitors in the AI field highlights very good results for both Alphabet and Microsoft: Google’s revenue came in at $74.60 billion, surpassing the estimates of $72.82 billion, while the earnings per share were $1.44, compared to $1.34 reported in analyst projections.
As also highlighted on the Mercati24 website, a reference portal in Italy for the world of investments, a decisive contribution to the performance came from the cloud business, which generated an operating profit of $400 million.
Microsoft also beat estimates with a revenue of $56.2 billion – projections were at $55.5 billion – and earnings per share of $2.29 compared to the projected $2.55; however, sales in the cloud division have experienced a sharp slowdown.
A snapshot of the US Banking Sector
The analysis of experts at Mercati24, of course, does not end with an exclusive examination of the technology universe: in fact, with maneuvers on official reference rates always in the foreground and fears for the balance of the financial system – which was put to a severe test a few months ago by the bank run of the Silicon Valley Bank, promptly defused by a coordinated intervention of the Fed and the Biden Administration – the banking sector remains under special observation.
JPMorgan, the giant led by Jamie Dimon, who actively participated in stabilizing the system by acquiring First Republic Bank, reported profits and revenue in significant growth, beating analyst estimates: EPS stood at $4.37 compared to the expected $3.96, while revenue of $41.30 billion beat the consensus of $39.15 billion.
Projections for the coming months are in line with the good results achieved so far, suggesting a fairly calm scenario also for stock market performance.
Stock markets: what future with looming recession risk?
The micro data, therefore, largely provide an encouraging snapshot of the world’s largest economy, although quarterly reports are a lagging indicator and projections still need to be confirmed.
However, investors, particularly those about to set up a portfolio allocation, do not take lightly the fact that international stock indices are nearing significant period highs with a looming recession risk that could reignite volatility.
According to experts at Mercati24, to guard against a potential correction immediately after immobilizing capital, appropriate operational approaches can be implemented: for example, a capital accumulation strategy on pure risk compartments mitigates the erraticity of prices and lowers the average loading prices in case of a drawdown.
Trading in the short term: financial intermediaries and trading tools
An alternative to this variant of the PAC is short-term trading, implemented not so much to extract value from various assets when they develop upward or downward price trends, but to hedge the investment portfolio during risk-off phases.
On the Mercati24.com website, there is a guide illustrating how to implement such a strategy, starting from the basic principles of trading. This educational material is crucial for learning to execute the trading techniques used by professionals in the financial markets and at the same time for selecting intermediaries that allow to keep the cost factor under control, with the provision of advanced platforms that are free and can be activated with very contained initial capital.
