Published On: Sat, Jul 23rd, 2016

Silicon Valley leads avalanche of quarterly reports

Silicon Valley leads avalanche of quarterly reports

SAN FRANCISCO: A quartet of technology heavyweights will be part of an avalanche of quarterly corporate earnings reports next week that, along with a meeting of Federal Reserve policymakers, could hold the key to whether Wall Street extends its record-breaking rally or loses steam.With second-quarter reporting season kicking into high gear, scorecards from Apple , Alphabet , Amazon.com and Facebook will be front and center for investors eyeing the S P 500’s already-stretched valuation following a nearly 9-percent rally since June 27.”These are very widely owned companies by institutional investors and there could be selling if the news is bad,” said Tim Ghriskey, chief investment officer of Solaris Group in Bedford Hills, New York.A total of 194 S P 500 companies are expected report their quarterly earnings next week; that is much higher than normal for any one week, even during most reporting seasons.Of reports in so far, 54 percent have shown revenue above expectations, slightly better than the 48-percent beat rate over the past year.Expectations for earnings also appear to be on the mend after over a year of declines caused by slumping oil prices and a strong dollar. Second-quarter profits are now forecast to dip 3.0 percent, less than the 4.5 percent drop expected at the start of July, according to Thomson Reuters I/B/E/S.With the S P 500 trading at about 17 times expected earnings, valuations appear stretched, with some investors saying current stock prices presume better-than-expected results and forecasts from major companies.Apple, Alphabet, Amazon and Facebook account for around 7 percent of the S P 500 and a fifth of the Nasdaq Composite, which has lagged the broader stock market so far this year.The S P 500 is up 6 percent in 2016 while the Nasdaq has gained just 2 percent.Many on Wall Street expect those leading technology firms to at least meet or slightly exceed analysts’ forecasts, strategists said. A series of big surprises in either direction could lead to steep stock swings.Indeed, shares of Amazon have whipsawed following its most recent reports, slumping 6 percent in one day after its December quarter profits missed expectations and surging 10 percent the day after its March-quarter results blew away forecasts.Wall Street widely expects sales of Apple’s iPhones to fall this year for the first time ever as it competes with cheaper rivals in China. But investors are banking on the release of a new smartphone later this year to return Apple to revenue growth in 2017.”I’m looking at the numbers coming in next week, and…

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