Wall St Week Ahead 'Crowded' megacap trade in US stocks awaits earnings test

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Next week’s earnings reports from some of the market’s biggest technology and growth companies could prove an important test for the U.S. stock rally, which has flagged as expectations for interest cuts fade.

A street sign for Wall Street is seen outside the New York Stock Exchange in New York City, New York, U.S., July 19, 2021. REUTERS/Andrew Kelly/File PhotoNEW YORK, April 19 - The companies are seen as important bellwethers due to dominant positions atop their industries, while heavy index weightings give their share price moves an outsize influence on benchmarks such as the S&P 500.

Additionally, the monthslong rally in stocks has made the index expensive relative to history at a time when rising Treasury yields are"Psychologically, the companies coming in at or above expectations is important," said David Katz, chief investment officer with Matrix Asset Advisors. "There's a lot of good news built into a lot of these companies."

Meta Platforms, whose shares have jumped over 40% in 2024, is due on Wednesday, while Alphabet and Microsoft, which are logging year-to-date gains of about 12% and 7.5% respectively, are set for Thursday.Six of the seven, excluding Tesla, are expected to post collective earnings growth of 42.1% in the first quarter, UBS strategists said on April 8.

Excluding the Magnificent 7, S&P 500 earnings have been negative on a year-over-year basis over the prior four quarters, according to JPMorgan analysts, underlining the group's importance to the market.

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