Tech stocks bounced back, on Monday, after registering a rare weekly loss that fuelled chatter of a potential pullback from record highs. The bounce-back came on the heels of what promises to be a defining week with significant earnings reports scheduled in the week. Amazon, Apple, Google, and Facebook are poised to report their quarterly earnings.
Tech Stocks Pull Back
The reports should shed more light on how the companies fared as the COVID-19 pandemic continued to cause havoc and disrupt operations in the second quarter. The earnings reports also come hot on the heels of one of the longest Bull Run after a massive correction in the first quarter.
The COVID-19 fuelled stock rally did experience a setback last week. The tech-laden NASDAQ index tumbled from record highs amid concerns about exhaustion after a meteoric rise to record highs. The sell-off came at the back of Apple, Amazon, Google, and Tesla stocks pulling lower, leading to a rarer back to back daily and weekly loss in almost more than two months.
The pullback experienced last week might as well have set the stage for another blockbuster move on the upside. The pullback brought about a much-needed correction as the stock market was getting too extended with the NASDAQ running out of room on running to the top of a decade long channel line. The NASDAQ had also diverged too much from the S&P 500, reflecting a considerable outperformance of the tech giants.
Fast forward tech stocks appear to have hit support near the 50-day moving lines, signaling another run on the upside following the bounce back on Monday trading session. With investors shunning the coronavirus pandemic, the stock market might embark on a new rally on earning reports boost.
Earning s Report Watch
The barrage of earnings reports will provide insights on how leading companies behind the coronavirus stock rally are handling the pandemic. Better than expected report should signal that the companies are immune to the shocks fueled by the epidemic, conversely validate the current hefty valuations.
Apple goes into the earnings report after shedding 3.85% the past week. Tesla stock fell 5.6% as Amazon extended losses to its 21-day line. Facebook also experienced a steep pull back to its 50-day and 10-day moving averages.
The NASDAQ could suffer a more severe pullback following last week’s correction on the earnings reporting, fueling concern about the future amidst the pandemic. Tech stocks may struggle to rebound should the earnings reports come out worse than expected, affirming ongoing fears about economic recession at the back of business disruptions.
For investors, it is a catch-22 situation as most of them have to decide whether to hold, sell, or take partial profits ahead of the defining earning reports. Any decision will depend on the size of the position in the market as well as underlying conviction about companies’ long term prospects amid the pandemic.
Leave a Reply