Tech Titans Upcoming Earnings: Shaping the Markets Fate

Key Points

• This week, the technology sector enters a critical phase as major global tech companies release their quarterly earnings.
• The QQQ ETF reveals technical vulnerability with a bearish consolidation pattern, which could trigger a downside move if support at $350 is breached.
• Earnings from tech giants, including Microsoft, Alphabet, Meta Platforms, and Amazon this week, hold significant sway in the QQQ and SPY, influencing market trends in the coming weeks.

This week marks a pivotal moment in the financial world as some of the globe's most influential companies unveil their quarterly earnings reports, particularly in the technology sector. 

These earnings disclosures have become a significant focal point for investors, traders, and market enthusiasts, given the enormous weight these companies carry within crucial market indices and exchange-traded funds (ETFs). 

In particular, the technology sector's giants, set to report this week, hold substantial sway in both the Technology Select Sector SPDR Fund NYSE: XLK and the Invesco QQQ Trust NASDAQ: QQQ, which tracks the performance of the Nasdaq-100 Index.

The outcomes of these earnings releases can send ripples throughout the technology sector and the broader market, represented by ETFs like the SPDR S&P 500 ETF Trust NYSE: SPY. 

This interplay between earnings and the market indices is a critical factor for investors to monitor, as it can dictate the overall market sentiment and the future direction of investments.

So, let's take a closer look at the current setup in the technology sector and what impact the upcoming earnings might have on it.

Technology Sector Nears Breakdown Level

Although the technology sector ETF QQQ remains up over 33% year-to-date, it has lagged other sectors in the previous three months, down 5.46%. It's worth noting, however, that the QQQs have slightly outperformed the broader market over that period. One reason might be that the tech's largest players are yet to report earnings. But that changes this week.

The sector finds itself vulnerable from a technical analysis perspective ahead of the earnings. Over the previous several months, the QQQs have formed a bearish consolidation, having confirmed multiple lower highs and now trading near the low end of the consolidation. 

If the sector breaks below critical support and the inflection level, around $350, downside momentum might ensue, and a move toward the 200-day SMA could be likely.

Of course, though, the direction for the sector will come down to the earnings and guidance released this week by the leading global companies.

Tech-Giants Reporting this Week and Why It Matters

Four out of the top eight largest weighted names in the QQQ are reporting this week. Their earnings will impact the sector and the direction of the overall market (SPY), potentially for weeks to come.

Microsoft NASDAQ: MSFT is set to report earnings on Tuesday after the close. The $2.45 trillion company holds second place for weighting in the QQQs, only behind Apple, with a 9.44% weighting and 59.2 million shares held. The consensus EPS for the quarter is $2.65. 

Alphabet NASDAQ: GOOGL will also report on Tuesday after the close. Adjusting for both class A and C stock, Alphabet has a combined weighting in the QQQ of 5.88%, making it the third largest holding. The consensus EPS forecast for the quarter is $1.45, and the reported EPS for the same quarter last year was $1.06.

Meta Platforms NASDAQ: META will release its quarterly earnings report on Wednesday after the close. Based on 14 analysts' forecasts, the consensus EPS forecast for the quarter is $3.57. META is the fifth largest holding of the ETF, with a weighting of 3.78% and 24.7 million shares held.

Last but certainly not least is Amazon NASDAQ: AMZN. The $1.34 trillion e-commerce and tech behemoth is set to report its earnings on Thursday after the close. AMZN is currently the ETF's third-largest holding with a 5.10% weighting and 81.7 million shares held. The consensus EPS forecast for the quarter is $0.58. The reported EPS for the same quarter last year was $0.2.