Wall Street Week Ahead ― Tech stock rebound faces doubters with earnings season ahead

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NEW YORK, Jan 21 ― A spate of earnings reports in coming weeks is set to test a recent bounce in technology and other megacap stocks, a category whose leadership position in...

NEW YORK, Jan 21 ― A spate of earnings reports in coming weeks is set to test a recent bounce in technology and other megacap stocks, a category whose leadership position in US markets has faltered after last year’s deep selloff.

Now, however, the focus is shifting to whether these companies can withstand a widely expected economic downturn while supporting valuations that some investors believe are too high. The top six stocks by market value in late 2021 ― Apple, Microsoft, Alphabet, Amazon, Meta and Tesla ― have seen their collective weight in the S&P 500 fall from 25 per cent to 18 per cent, according to Strategas Research Partners.

Fourth-quarter earnings in the tech sector are expected to have declined 9.1 per cent from a year ago, compared to a 2.8 per cent decline for S&P 500 earnings overall, according to Refinitiv IBES. “The biggest positive could be if they could show a control of expenses while keeping at least reasonable growth intact,” said Rick Meckler, partner at Cherry Lane Investments in New Vernon, New Jersey. “It’s a hard balancing act.”

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