Tech Giants Face 29% to 54% Stock Drops Amid Tariff Turmoil

This week, over a hundred companies listed on the S&P 500 index are set to release their first-quarter financial reports. Against the backdrop of fluctuating policies under the Trump administration, investors are closely monitoring the performance outlook of these companies, with a particular focus on the tech sector. The tech stocks have been leading the market decline amid tariff-induced market turbulence, with the "Magnificent Seven" tech giants—Apple, microsoft, alphabet, amazon, meta, Nvidia, and Tesla—all experiencing significant drops from their recent 52-week highs. Given the substantial market decline over the past month, several Wall Street strategists have pointed out that observing the stock price reactions on the day following the release of these large companies' financial reports will be a crucial indicator of whether the market has hit bottom.

Scott Kroner, a stock strategist at Citigroup, noted in a pre-earnings season report to clients that the significance of the first-quarter earnings season lies in the insights it provides into how corporate management interprets the impact of tariffs, allowing us to gauge what information has already been priced into individual stock prices. Alphabet, the parent company of Google, and Tesla are among the companies scheduled to release their financial reports this week. Alphabet's stock has declined nearly 29% from its recent 52-week high, while Tesla's stock has plummeted approximately 54% from its recent 52-week high.

Tesla's stock price may have already absorbed a significant portion of the negative news. Its first-quarter delivery figures were disappointing, and over the past four months, its full-year earnings forecast for 2025 has been reduced by about 20%. However, ahead of its earnings release on Tuesday, the market remains uncertain: has its stock price already fallen to a reasonable low?

Tom Lee, the chief research officer at Fundstrat, wrote in a Monday report to clients that Tesla's stock performance following its earnings release on Tuesday will "tell us whether the key stocks in the market have 'fallen as far as they can go.'" Keith Lerner, co-chief investment officer at Truist, attributed the recent stock sell-off to market expectations that Trump's tariff policies would worsen corporate earnings prospects. He believes that the focus of the upcoming financial reports should not be on what companies say but on how their stock prices react.

Lerner noted that investors have already anticipated that companies will lower their earnings guidance. However, if a company actually lowers its guidance and its stock price rises instead of falling, this would be a significant signal that negative news has been fully absorbed. "In our view, that's the key," Lerner stated.

The U.S. stock market has recently faced the test of escalating tariffs, with the Nasdaq and S&P 500 indices teetering on the brink of a bear market. The tariff negotiations are far from over, and the market is about to face another challenge: the dense release of corporate financial reports. Unlike previous earnings seasons, this time around, there may be clear signs of divergence among U.S. listed companies. For instance, whether the tech giants can maintain their growth momentum and how their earnings guidance for the next quarter will impact their stock performance. Given their significant weight in the U.S. stock market, the performance of these tech giants will influence the overall direction of the market.

According to the earnings disclosure schedule, Tesla will release its financial report after the market closes on April 22, and Google will follow on April 24. Microsoft, apple, Amazon, and Meta are set to release their financial reports on April 30 and May 1. Therefore, the trading days of this week and next week will be crucial for the release of financial reports from major U.S. tech companies.

From a market perspective, the current quarter's financial performance of the tech giants is not the primary focus. Instead, the market is more concerned with the earnings guidance provided by these companies. If the guidance is poor, the stock price could drop by more than 5% after the market closes. Given the impact of tariff escalation and the high base effect of some U.S. tech giants' earnings, it is unlikely that the guidance for the next quarter will be optimistic. Therefore, the market should be prepared for the possibility of another "black swan" event in the U.S. stock market.

In addition to the impact of the financial reports from U.S. tech giants, the initial value of the April manufacturing PMI for Europe and the U.S. will be released on April 23. Concurrently, the Federal Reserve will publish its Beige Book on the economic situation on April 24, providing a comprehensive assessment of the current U.S. economy. If the U.S. does not promptly adjust its tariff policies, the impact of these policies on the U.S. economy will become increasingly apparent in the coming days.

Under the influence of escalating tariffs, the U.S. stock market, dollar, and bonds have experienced significant volatility. The dollar index has fallen below 100, with a year-to-date decline exceeding 8%, erasing all of last year's gains. The U.S. stock market has also accelerated its decline, with the Nasdaq and S&P 500 indices experiencing year-to-date declines of 15% and 10%, respectively, marking the largest year-to-date declines in recent years. However, the latest financial reports from U.S. listed companies have not fully reflected the impact of tariff escalation on their performance. As these companies gradually release their earnings guidance for the future, there is a possibility of significant downward revisions, which could affect the overall valuation of the U.S. stock market.

Under tariff policies, there are no clear winners. If the U.S. does not promptly adjust its tariff policies, the probability of another "black swan" event in the U.S. stock market will be high. On one hand, there is the uncertainty surrounding tariff policies, and on the other, the Federal Reserve's reluctance to cut interest rates, along with expectations of slowing growth in the earnings of leading U.S. companies. These factors will impact the U.S. domestic economy and the credibility of the dollar. If the credibility of the dollar is significantly shaken, it will affect various aspects of the U.S. economy. The synchronized volatility of U.S. stocks, dollars, and bonds is just a prelude to the potential shakeup of the dollar's credibility. If this credibility is significantly undermined, the impact on the U.S. economy and financial markets will be substantial.

The fluctuating tariff policies have led global funds to seek safe havens such as gold. Amid the escalating global risk aversion, gold prices have continued to rise, making the gold market one of the few safe havens in the current global market. In retrospect, if the U.S. does not make significant concessions on tariff policies, the ultimate loser will still be the U.S. itself.