Investors’ focus this week will be on earnings results, with some of the most weighted companies in the S&P 500 ready to deliver their quarterly reports.
Over the past few weeks, most of the companies that posted earnings results topped Wall Street’s estimates despite widespread concern about the impact of supply chain challenges on corporate profits. These better-than-feared results helped both the S&P 500 and the Dow reach new record highs in the past week.
As of Friday, about 23% of S&P 500 companies had reported third-quarter results. Of these, 84% topped Wall Street’s earnings per capita expectations. Share (EPS), according to data from FactSet. And the estimated revenue growth for the S&P 500 was 32.7%, based on actual results and expectations for companies that still do not have to report. If it is maintained at the end of the third quarter’s earnings season, it will mark the third largest earnings growth calculated for the index since 2010.
Given the series of stronger-than-expected results published so far, this week’s report has an increased bar for clearing.
And this is especially true for the Big Tech companies, including Facebook (FB), Apple (AAPL), Amazon (AMZN) and Alphabet (GOOGL). Most of these performed far better than the market last year, but have seen their stock gains cool so far in 2021 amid concerns over rising interest rates, chip shortages and slower growth following an increase in online media use and demand for software at the height of the pandemic.
Despite the short-term challenges, however, some strategists have struck an optimistic tone in the technology sector as a whole.
“While chip shortages will be a major talking point for tech investors over technological earnings seasons and clearly an overhang, we believe the street will instead look through any short-term disruption and focus on the underlying healthy demand drivers of 2022, which look robust out, “Wedbush analyst Dan Ives said in a note last week.
A number of the closely monitored technology companies that reported last week released results that disappointed investors or highlighted the long-term effects of these myriad concerns. Snap (SNAP), parent company of the disappearing photo-sharing platform app Snapchat, offered a forecast for the current quarter that did not live up to expectations, with challenges in the supply chain for the advertiser’s customer base and privacy-related changes to Apple’s iOS operating system that weighed on sales and surplus.
The weak guidance sent Snap’s stock up 27% on Friday for its biggest single-day fall on record, pulling shares of other ad-driven companies down, including Facebook, Pinterest (PINS), Twitter (TWTR) and Alphabet.
By July, Facebook had already marked an early impact from Apple’s iOS privacy update, which allows users to better control how apps track them. Facebook chief financial officer Dave Wehner said during the company’s second-quarter earnings call that the company expected “increased ad targeting headwinds in 2021 from regulatory changes and platform changes, particularly recent iOS updates” and expected these “would have a greater impact in the third quarter to the other. ”
Still, social media juggernaut’s top-line growth is expected to rise by a further 37% in the third quarter last year to reach a new quarterly record of $ 29.45 billion. Still, this growth rate would mark a step down from second-quarter 56% year-on-year growth.
For peer-to-peer ad-driven business Alphabet, a pick-up in consumer travel can help burn the company’s core Google Search business up, even in the face of other ad-industry headwinds. Both Snap and American Express (AXP) last week highlighted a pickup they witnessed in consumer travel behavior and home spending in their third-quarter earnings releases and calls.
“Lost in the noise, SNAP also highlighted the possibility driven by the return of travel budgets, which is a positive reading for GOOGL’s overall search business,” Daniel Salmon, BMO Capital Markets’ Internet and media analyst, wrote in a note Friday.
Ongoing semiconductor shortages and supply-related issues also gave a blow to other technology companies. Tesla (TSLA) said in its earnings report last week that “A number of challenges, including semiconductor shortages, port congestion and rolling blackouts, have affected our ability to keep factories running at full speed.”
And reports earlier this month from Bloomberg suggested that Apple would likely reduce its iPhone 13 production targets by as much as 10 million units amid chip shortages. However, the company is still expected to have solid revenue growth of 21%, bringing sales to $ 84.67 billion as consumer demand for the latest smartphones remained resilient, particularly in the US and China.
Rounding off this technology-heavy earnings week will be Amazon (AMZN), which announces quarterly results with Apple on Thursday after the market closes. The company has lagged behind the market since the last reporting of earnings at the end of July and fell by 7.3% since July 29 against a 2.9% gain in the S&P 500.
Investors have been particularly cautious with Amazon given widespread supply chain constraints, rising labor costs and fears that e-commerce sales and growth in Amazon Web Services could slow after a pandemic-induced rise. Amazon shares had risen 76% by 2020, and the stock was the second-best FAANG performer after Apple that year.
“Concerns across the top line, bottom line and broader macro have overall driven the cautious mood into the year-end,” JPMorgan analyst Doug Anmuth wrote in a note last Thursday. “However, we believe that there is still a significant secular shift towards e-commerce in the future, and Amazon has a very strong track record around investing in future growth opportunities.”
“Macro problems related to supply chain, port jams and stockpiles are well documented and have intensified into the holiday season, raising concerns that delays may affect the timing of AMZN receiving 1P / 3P. [first-party and third-party seller] inventory and certain items could remain sold out, “he added. Overall, we believe that AMZN embedded some degree of disruption in the 3Q guide, and we believe that AMZN scaled its inventory in anticipation of greater 2H demand. ”
At the end of July, Amazon said it expected third-quarter revenue to total $ 106 billion to $ 112 billion, missing consensus expectations at the time. Wall Street analysts now expected to see Amazon after third-quarter sales of $ 111.8 billion, representing a 16% year-over-year growth, or the slowest since early 2015.
Monday: Chicago Fed National Activity Index, September (expected 0.2, 0.29 in August); Dallas Fed Manufacturing Activity Index, October (expected 6.2, 4.6 in September)
Tuesday: FHFA House Price Index, month-over-month, August (1.5% expected, 1.4% in July); S&P CoreLogic Case-Shiller 20-City Composite, month-over-month, August (1.44% expected, 1.55% in July); S&P CoreLogic Case-Shiller 20-City Composite, year-over-year, August (expected 20.00%, 19.95% in July); New home sales month by month in September (756,000 expected, 740,000 in August); Conference Board Consumer Confidence, October (expected 108.5, 109.2 in September)
Wednesday: MBA Mortgage Applications, week ended October 22 (-6.3% during previous week); Advance Goods Trade Balance, September (- $ 88.3 billion expected, – $ 87.6 billion in August); Wholesale stocks, month-over-month, preliminary September (expected 1.0%, 1.2% in August); Permanent orders, preliminary September (-1.0% expected, 1.8% in August); Durable goods Orders, excluding transport, provisional September (expected 0.4%, 0.3% in August); Non-prudent capital goods, excluding aircraft, provisional September (expected 0.4%, 0.6% in August); Non-prudent capital goods, excluding aircraft, provisional September (expected 0.4%, 0.8% in August)
Thursday: Initial unemployment claims, week ended October 23 (292,000 expected, 290,000 during last week); Continued receivables, week ended October 16 (expected 2.420 million, 2.481 million during previous week); GDP on an annual basis, quarter-over-quarter, first estimate in the third quarter on an annual basis (2.7% expected, 6.7% in the 2nd quarter); Personal consumption, first estimate in Q3 (expected 0.7%, 12.0% in Q2); Basic expenses for personal consumption, quarter-over-quarter, first estimate in third quarter (expected 4.4%, 6.1% in 2nd quarter); Pending home sales, September (expected 0.6%, 8.1% in August); Kansas City Fed Manufacturing Activity Index, October (expected 19, 22 September)
Friday: Personal income, September (-0.2% expected, 0.2% in August); Personal expenses, September (expected 0.6%, 0.8% in August); Personal spending Core Deflator, month-over-moth, September (expected 0.2%, 0.3% in August); Personal Expenditure, Core Deflator, Year-over-Year, September (3.7% Expected, 3.6% in August): MNI Chicago PMI, October (64.0 Expected, 64.7 in September); University of Michigan Sentiment, October final (71.4 expected, 71.4 in September)
Monday: Kimberly-Clark Corp. (KMB), Otis Worldwide Corp. (OTIS) before the market opens; Facebook (FB) after the market closes
Tuesday: Centene (CNC), UPS (UPS), 3M (MMM), General Electric (GE), Waste Management (WM), Eli Lilly (LLY), Hasbro (HAS), Raytheon Technologies (RTX), Invesco (IVZ), The Sherwin -Williams Co. (SHW), Lockheed Martin (LMT), S&P Global (SPGI) before the market opens; Capital One Financial Corp. (COF), Twitter (TWTR), Juniper Networks (JNPR), Visa (V), Advanced Micro Devices (AMD), Microsoft (MSFT), Texas Instruments (TXN), Alphabet (GOOGL) after market close
Wednesday: CME Group (CME), McDonald’s (MCD), Hilton Worldwide Holdings (HLT), Bristol-Myers Squibb (BMY), Boeing (BA), The Coca-Cola Company (KO), Kraft Heinz (KHC), General Motors (GM )) before the market opens Ford (F), Xilinx (XLNX), O’Reilly Automotive (ORLY), United Rentals (URI), Align Technology (ALGN), eBay (EBAY), ServiceNow (NU) after closing the market
Thursday: Merck (MRK), Caterpillar (CAT), Yum! Brands (YUM), Comcast (CMCSA), Moody’s Corp. (MCO), Nielsen Holdings (NLSN), Stanley Black & Decker (SWK), The Hershey Co. (HSY), Molson Coors Beverage Co. (TAP), Mastercard (MA), Altria Group (MO) before the market opens; Apple (AAPL), Western Digital Corp. (WDC), Starbucks (SBUX), Gilead Sciences (GILD), Amazon (AMZN) after the market closes
Friday: Royal Caribbean (RCL), T Rowe Price Group (TROW), Charter Communications (CHTR), Chevron (CVX), AbbVie (ABBV), Exxon Mobil (XOM), Colgate-Palmolive (CL), Newell Brands (NWL) before the market open
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
Read the latest financial and business news from Yahoo Finance
Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn, Youtube, and save your