This week, four firms among Mag7 (Magnificent Seven) are getting ready to report their earnings. Far more essential than the two above, this massive auction has the potential to really influence market sentiment. Since then, the Mag7—a grouping that includes seven of the biggest and most influential tech companies—have become ubiquitous. Investors are looking for strong performance from these companies to mitigate the outright bearish market sentiment.
Earnings reports are often highly anticipated for the ability they have to set the tone for market sentiment and direction as a whole. Investors are laser-focused on positive performances from these companies. They think that kind of success would make the other Mag7 names follow suit, which would go a long way to restore confidence in the tech sector overall.
Performance over Time
Performance really boils down to consistency. It is our hope that these earnings will relieve some of the uncertainty that is shaking market confidence.
European carmakers, most notably VW and its subsidiaries including Porsche, are as well on board with an upbeat projection. These companies are beginning to regain the territory they ceded in recent days or weeks. They are smartly seizing upon a somewhat more favorable market and public environment. Former President Donald Trump provided that last week, when he softened his stance enough to qualify for upbeat sentiment. This reversal was just what the doctor ordered to buoy beleaguered risk assets.
Within the last week, risk assets have begun rebounding from their nadir. There’s a buoyant mood among traders returning from summer break and looking for a turnaround. Perhaps most importantly, caution is not only warranted, it is still necessary. Bears might re-emerge should key economic data continue pointing towards deterioration before the US-China trade talks have a chance to find resolution.
It’s future economic reports that will likely usher in any bearish sentiments. If upcoming April jobless claims and ADP employment report pick up some worrying trends, expect the market to panic. The equally awaited jobs report will be instrumental in guiding market expectations. A consumer confidence survey comes out Tuesday. In fact, it’s bound to be worse—perhaps a lot worse—which is sure to dishearten investor sentiment.
European international markets are up sharply in early trading today. This increase reflects the sweeping optimistic mood that has been accumulating all week long. That increase is a product of better business on behalf of these companies. It’s just as much a function of a new and developing sense of optimism among investors about the macroeconomic picture. That said, there’s still a huge concern about the US-China trade war, which keeps creating unknowns that could impact future earnings.
Unless there is some sort of major breakthrough in US-China negotiations, traders will have little to go on and continue to be overly cautious. There’s growing concern that the good news of strong Q1 earnings is not sustainable. A firm resolution addressing the trade problems is critical to long-term sustainability. Most analysts predict a sharp decline in earnings during Q2 without an agreement. This new state action would reverse many of the hard-fought wins we’ve achieved in recent years.
As we transition to the second half of the week, earnings reports will begin to pour in. All eyes will be on the Mag7 companies to see if they can provide the results necessary to maintain market momentum. Their success will affect broader market sentiment as we enter a more difficult economic climate. Positive earnings will be key to market momentum. Outside influences, such as our nation’s trade relations, will be critical in determining market direction in the days ahead.