In a mixed trading day, stock market indexes rose at Monday's opening in anticipation of heavyweight tech stocks ready to post earnings this week. The key gauges quickly gave up their gains, then climbed back. Small caps outperformed. The action suggested the hunt for a clear direction continues ahead of a key Federal Reserve decision on interest rates on Wednesday.
Trading volume was significantly lighter compared to the same time Friday, with volume on the Nasdaq down 15% and off 13% on the NYSE.
Meta Platforms, Microsoft, Apple, Alphabet, and Amazon headline key tech stocks scheduled to announce their earnings from Tuesday through Thursday.
Energy giants Exxon Mobil and Chevron report on Friday.
The Dow Jones Industrial Average was modestly up by 0.3% in early afternoon while the S&P 500 rose 0.2% and the Nasdaq was down 0.2%.
Meanwhile, Tesla reached its highest close since May 6. The stock is on a nine-day winning streak and is up 17%. This marked Tesla's second longest run after its 11-day marathon higher in January 2021. The company beat earnings estimates last week with earnings of $2.27 a share versus estimates of $1.80.
The Innovator IBD 50 Fund was up fractionally.
Crude oil jumped nearly 1.9% to $96 a barrel. The Russell 2000, meanwhile, gained 0.6%. The yield on the 10-year Treasury bond moved up 3 basis points, or more than 1%, to 2.81%.
Economic Data Watch
With a 75 basis-point rate hike priced into the markets, the guidance after Wednesday's FOMC meeting will be key to the way forward. It is going to be a packed week with the Consumer Confidence Index and new home sales reports due Tuesday, and Q2 GDP and weekly unemployment numbers coming out on Thursday.
Also on deck is the more comprehensive measure of inflation, the Personal Consumption Expenditures index on Friday.
Among other factors such as an increasingly hawkish Fed, inflation, and slowing consumer demand, a stronger U.S. dollar is likely to moderate corporate profits for multinational technology giants.
Tech Stocks: Apple Earnings Wednesday
Continuing global and US demand for iPhones will be on watch as Apple struggles with a strong U.S. dollar in international markets, potentially resulting in lowered guidance for 2023 despite a strong product pipeline.
In the March-ended quarter, Apple posted $1.52 earnings per share, up 9% vs. a year ago and above Wall Street's estimate of $1.43.
Current quarter estimates are lower at $1.14. The stock's RS rating of 78, a measure of the stock's performance with respect to the S&P 500, has deteriorated in the past six months.
Apple shares are trying to rebound amid a prolonged first-stage consolidation and may hit resistance at its 200-day moving average line.
Amazon, Alphabet Still Struggle
Meanwhile, the Street expects guidance for Amazon to fall. This could have a cascading effect on other businesses such as Netgear and Aterian who have significant revenues generated through the e-commerce behemoth. The increasing dominance of Amazon Web Services (AWS) and the company's growing logistics business are positives as we head into a choppier macroeconomic climate.
The stock has an RS Rating of 28. The megacap e-commerce, retail and tech firm had been trading below its 50-day moving line since its 20-for-1 split went into effect on June 6 but broke above the line on Friday.
Alphabet's 20-for-1 stock split may not have done much for the stock yet. However, if the stock enters the Dow Jones Industrial Average as a result of the split, it could drive the stock price higher.
Alphabet's ad revenues continue to account for most of the company's profits since its cloud computing lags more robust offerings by Amazon and Microsoft. In Q1, search and cloud revenues did well but significantly lower ad revenues from YouTube due to inflationary pressures drove the stock down.
GOOGL is trying to bottom out and trades 29% off a 52-week peak of 151.55. A number of other tech stocks in IBD's Long-Term Leaders are performing better in terms of trading closer to their all-time and 52-week highs.
Alphabet missed earnings estimates of $1.28 per share last quarter by $0.05. Current estimates are also $1.28.
Shares are still trading below the 50-day moving average line and show an unhealthy Relative Strength Rating of 40.
More Tech Stocks To Watch: Microsoft In A Big Base
Microsoft's entry into Metaverse with its Mesh platform, its portfolio of productivity applications and diversification into cloud services through Azure helped it report record earnings last quarter. And they will likely help the company weather whatever comes next. Coming off a strong quarter with both revenue and earnings beats, the company is expected to post earnings of $2.28 per share for the current quarter.
MSFT has fallen below its 50-day moving average and has an RS rating of 55.
Top tech stocks tend to trade well above their 50-day lines and lead them higher ahead of a possible breakout.
Facebook-parent Meta Platforms, lowered its Q2 revenue forecasts to $28-$30 billion after a Q1 revenues miss, though it beat earnings estimates with $2.72 EPS against estimates of $2.50. Revenues from its ecosystem of apps dominate the business though the company is making forays into the metaverse — the integration of 3D, virtual and augmented reality that will impact how we socialize, work and play. META is trading below its 50-day moving average and has an RS rating of 17.
Energy Leaders Profit On Oil Rise
Outside tech stocks, oil and gas plays still deserve attention.
Inflationary pressures that drove oil above $100 a barrel during the quarter, and improving demand as the economy opened up, are widely anticipated to boost Q2 earnings. However, declining crude oil prices now will likely impact future earnings in the energy sector.
Exxon missed estimates with $2.07 earnings per share against estimates of $2.25 last quarter. Current quarter EPS estimates for the Texas-based oil giant stand at $3.53. Shares are trading above their 200-day line and below their 50-day line.
The stock has a Relative Strength Rating of 97.
Chevron reported lower earnings of $3.36 per share against estimates of $3.44. Current estimates for Q2 call for $5.01. Falling crude oil prices may result in weaker outlook.
The stock broke above its 200-day line during last week's rally and has an RS rating of 94.
