Tech Earnings Season Begins With 14% Gain Expected From Magnificent Seven

US stock futures remained relatively stable on Sunday night as investors prepared for a pivotal week of corporate earnings. The market's focus was particularly on the results from major tech companies, which have been significant drivers of this year's stock rally. The low-key trading indicated a cautious approach from traders, who are bracing for a wave of financial results, especially from big tech firms.

The S&P 500 and Nasdaq Composite both reached record highs, with the S&P 500 gaining 0.6% and the Nasdaq up 1.5%. However, the Dow Jones Industrial Average experienced a decline over the week. The attention was centered on the earnings from the Magnificent Seven: Alphabet, Tesla, Microsoft, Apple, Amazon, Meta, and Nvidia. Alphabet and Tesla are scheduled to kick off the tech earnings calendar this week.

According to FactSet, the Magnificent Seven are expected to report an aggregate 14% gain in second-quarter earnings. In contrast, the remaining 493 companies in the S&P 500 are projected to see earnings grow by just 3.4%. This divergence has fueled investor hopes that strong tech earnings could boost the broader market. Mark Malek, chief investment officer of Siebert Financial, noted that the S&P 500 was at record levels at the start of the earnings season. He added that if the market could navigate through the season without significant disappointments, it would be crucial for maintaining the current upward momentum.

While earnings remain in the spotlight, trade issues continue to be a market concern. On Sunday, the US Commerce Secretary stated that August 1 would be a hard deadline for implementing new tariffs. Countries aiming to avoid the tariffs must begin making payments by that date. However, diplomatic channels would remain open beyond the deadline, with no restrictions on countries continuing talks with the US after August 1. The trade rhetoric comes amid a market that has largely ignored tariff fears, but a significant collapse in talks could add to market volatility, particularly for stocks exposed to international trade.

Investors are also monitoring economic data releases for signs of strength or weakness in the US economy. The June reading of the Conference Board’s Leading Economic Index (LEI) is scheduled for release on Monday. The LEI is a blend of 10 forward-pointing indicators commonly used to forecast the economy’s strength three to six months from now. Economists anticipate that the report will send mixed messages, with strong consumer demand offset by headwinds from higher interest rates and global uncertainty.

Beyond big tech, many companies across various sectors will report earnings, providing a broader picture of the economic landscape. Verizon Communications and Domino’s Pizza are among the companies scheduled to report their latest quarterly results on Monday. The earnings season has been strong so far, with more than 86% of the first 59 companies in the S&P 500 to report having topped Wall Street estimates. Tech-driven optimism, potential trade tangles, and significant economic data releases create a complex environment for investors. As the second-quarter earnings season progresses, investors will be looking to gauge whether the bullish run on Wall Street can continue.