NEW YORK: A spate of earnings reports in coming weeks is set to test a recent bounce in technology and other megacap stocks, a category whose leadership position in US markets has faltered after last year’s deep selloff.
The tech-heavy Nasdaq 100 index has gained over 3% in 2023, double the rise for the S&P 500. Shares of some megacap companies - which include those grouped outside of tech in sectors like communication services and consumer discretionary - have shot higher, with Amazon, Meta Platforms and Nvidia posting double-digit percentage increases.
Several factors are driving that outperformance, including investors piling into stocks they believe were overly punished in 2022. A moderation in bond yields, whose jump last year particularly pressured tech-stock valuations, is also likely helping the group, investors said.
Now, however, the focus is shifting to whether these companies can withstand a widely expected economic downturn while supporting valuations that some investors believe are too high.
“To keep this rebound going, the guidance for ’23 has to be less worse than what people are anticipating,” said Peter Tuz, president of Chase Investment Counsel, whose firm recently pared its holdings in Apple and Microsoft.
Tech and growth stocks led US equity markets for years following the 2008 financial crisis, aided by near-zero interest rates. They struggled along with broader markets last year as the Federal Reserve raised rates to fight surging inflation, and...
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