NEW YORK: A bevy of major US earnings reports this week led by Apple and Microsoft could help technology and growth stocks reassert their dominance after a recent run by banks, energy and other potential beneficiaries of an economic reopening.
After leading markets higher for most of 2020, technology-related stocks took a backseat late last year to so-called value or cyclical plays, whose businesses are expected to gain the most from the economic revival promised by vaccines against Covid-19.
That shift has stalled in recent days as investors weighed lacklustre outlooks from big banks. The Russell 1000 growth index was up 3.3% in the past week as of last Friday morning, while its value counterpart fell 1.5%.
This week’s crop of fourth-quarter results – with about a quarter of the S&P 500 reporting – could help determine whether the resurgence in growth stocks will continue, potentially threatening the recent rally in value and cyclical shares, said Chuck Carlson, chief executive officer at Horizon Investment Services.
“That is probably going to be the story of earnings season, ” he said. “What will earnings mean in terms of the sustainability of this rotation that has occurred in the last eight, nine weeks.”
Steady growth and resilience in the face of the coronavirus pandemic made technology stocks desirable to investors, who poured money into the sector as widespread lockdowns devastated swaths of the US economy.
But a resumption in tech outperformance could also revive concerns over investor crowding into popular names. The biggest five technology-related companies account for about 22% of the weight of the S&P 500.
Aside from Microsoft, other tech sector companies due to report this week include Visa and Mastercard. — Reuters