Week Ahead: “Big M.A.M.A.” to weigh on NQ100_m

By ForexTime

Four Big Tech companies, with a combined market cap of over US$ 5 trillion (that’s $5,000,000,000,000), are set to release their respective quarterly earnings in the coming week.

The final week of April also features these scheduled economic data releases and events:

Monday, April 24

• EUR: Germany April IFO business climate
• Walt Disney may cut thousands of jobs this week
• Q1 earnings from embattled banks: Credit Suisse, First Republic Bank

Tuesday, April 25

• USD: US April consumer confidence
• NQ100_m: Microsoft, Alphabet Q1 earnings (after US markets close)

Wednesday, April 26

• NZD: New Zealand March external trade
• AUD: Australia March CPI
• CAD: Bank of Canada releases April meeting minutes
• NQ100_m: Meta Q1 earnings (after US markets close)

Thursday, April 27

• EUR: Eurozone April economic confidence
• USD: US 1Q GDP; weekly initial jobless claims
• NQ100_m: Amazon Q1 earnings (after US markets close)

Friday, April 28

• JPY: Bank of Japan rate decision; April Tokyo CPI; Japan March industrial production, retail sales, and unemployment
• EUR: Eurozone 1Q GDP; Germany April CPI
• USD: US March PCE Deflator, personal income and spending

How big is “Big M.A.M.A.”?

First, a quick reminder about the sheer size of these tech giants that are due to report their Q1 earnings.

Here’s their respective market cap as of US market’s close on Thursday, April 20:

(Market capitalization = how much each company is valued by the markets)

• Microsoft: US$ 2.130 trillion
• Alphabet: US$ 1.352 trillion
• Amazon: US$ 1.064 trillion
• Meta: US$ 0.5466 trillion

What to look out for from these Big Tech announcements?

1. Economic headwinds dampening earnings?

Fears of a looming global recession are set to weigh negatively on the core businesses of these Big Tech companies:

• Microsoft is already facing a structural slowdown in the PC industry
• Alphabet’s ad business may see a pullback from customers in the financial sector from last month’s banking turmoil
• Meta’s Facebook is experiencing weakening engagement
• Amazon’s core business of selling goods across the US has lost money for the last 5 consecutive quarters

The challenging economic backdrop is also expected to be a drag on demand for cloud computing services out of Microsoft (Azure), Amazon (AWS), and Alphabet (Google Cloud) – which have been key earnings drivers for these respective companies.

2. Job cuts: boost to the bottom line?

Here are the headline figures for the intended number of jobs to be slashed according to announcements made in Q1 2023:

• Microsoft: 10,000 jobs (5% of its workforce)
• Amazon: 18,000 jobs (1% of total employees)
• Meta: 10,000 jobs (accumulated 25% of workforce, including the 11k jobs, or 13% of its workforce, already removed back in November 2022)
• Alphabet: 12,000 jobs (6% of global workforce)

Ultimately, fundamentally-driven investors want to know whether such cost-cutting measures are having the desired effect of propping up the company’s financials amidst these challenging times.

3. ChatGPT: the AI race is on

​​​​​​​The buzz surrounding ChatGPT/AI technologies have certainly contributed to the double-digit gains for Big Tech stocks so far in 2023.

Markets will be eager to find out how soon before the hype can turn into a profits boost, and whether each of these tech companies have enough of an edge in this red-hot AI race.

How much could these stocks move post-earnings?

Here are the forecasted moves for each stock, either upwards or downwards, on the trading day after their respective financial announcements:

• Microsoft: 3.7% move on Wednesday, April 25th
• Alphabet: 5.45% move on Wednesday, April 25th
• Meta: 9% move on Thursday, April 27th
• Amazon: 6.54% move on Friday, April 28th

(% figures as of Friday, April 21st before US markets open)

Why would NQ100_m react to these Big Tech earnings?

Note that every single one of these behemoths (Microsoft, Alphabet, Amazon, and Meta) are members of the tech-heavy index, the Nasdaq 100, which is the underlying asset tracked by the NQ100_m.

Their combined market cap of US$5.09 trillion accounts for one-third of the Nasdaq 100’s market cap of US$15.03 trillion.

Hence, the market’s collective reaction to these upcoming Big Tech earnings is set to have an outsized impact on how the NQ100_m performs in the final week of April.

How might NQ100_m react to Big Tech earnings?

• Should markets react positively to these Big Tech earnings, that could send the NQ100_m above its month-to-date high at 13,242, and to a fresh 8-month peak.
• However, disappointing earnings out of these tech giants may drag the NQ100_m to a lower low beneath the key 12850 support region.

  This price area also contains the 38.2% Fibonacci retracement level from NQ100_m’s November 2021 peak down to the October 2022 trough.

To be clear, the Nasdaq 100’s year-to-date advance still stands at an impressive 18.7% so far in 2023, despite the rally having stalled so far in April.

These tech giants could do with a fundamental boost by way of better-than-expected earnings to extend that advance in share prices before April is over.

Otherwise, tech stock bulls might have to wait until the Federal Reserve’s next policy meeting in early May.

A more dovish note out of the US central bank, perhaps indicating a pause on its rate hikes after its May FOMC meeting with perhaps an eye on lowering interest rates later in 2023, may just send stock market bulls racing once more and charging US stock indices higher.

On the other hand, a disappointing earnings season out of Big Tech next week, followed by still-hawkish signals out of the Fed in early May, would likely undo some of the NQ100_m’s year-to-date gains.

Article by ForexTime

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