NASDAQ 100 FORECAST: NEUTRAL
- The Nasdaq 100 index pulled back from record levels after FAANG earnings
- Investors are anticipating 74% YoY earnings growth rate for the broader market
- Apple, Netflix, Intel and Amazon see their 2H growth rate slowing amid economic reopening and chip shortages
Robust Q2 results from the FAANG companies (Facebook, Apple, Amazon, Netflix and Google) marks the peak of the earnings season. Many of the big tech firms have warned investors about slower growth rates or lower margins in the second half however, pulling their stock prices lower after results were released. This is because the pandemic winners are seeing their growth ratesnormalize as economic reopening drives pent-up demand for outdoor activities. There is also a world-wide chip shortage. This may serve to limit upside potential for Nasdaq 100 as it attempts to reach new highs.
For the broader market, 261 S&P 500 companies have reported results so far. Among them, 89% have beaten the Street’s forecasts with an average positiveearnings surprise of +21.9%. The S&P 500 is expected to deliver a blended earnings growth rate of 74% YoY in Q2, according to Factset. If 74% is the actual number, it will mark the highest rate in more than a decade.
Stay tuned for more earnings update from DailyFX. Click HERE to download out quarterly equity forecasts.
Major US Tech Earnings Q2 2021
Source: Bloomberg, DailyFX
Looking ahead, market focus may shift to the US nonfarm payrolls report and rising Covid-19 cases caused by the Delta variant around the world. US coronavirus cases have resurged over the past weeks, with the Delta variant contributing more than 92% of new cases. The latest weekly initial jobless claims data disappointed investors, underscoring a fragile rebound in the labor market and may strengthen the Fed’s dovish stance.
Meanwhile, the Citigroup Economic Surprise Index (CESI) has flipped to negative territory for the first time since June 2020, suggesting that the economic rebound in the world’s largest economy may not be as strong as people had anticipated. Pandemic uncertainties and a seemingly slowing growth momentum may dampen investors’ risk appetite and encourage profit-taking in the weeks to come.
Citigroup Economic Surprise Index – United States
— Written by Margaret Yang, Strategist for DailyFX.com
To contact Margaret, use the Comments section below or @margaretyjy on Twitte