YES Bank Q3 results: Bank reports record loss of Rs 18,564 crore in Dec quarter

This market is an opportunity for the risk-savvy investors: Jim O Neill

Federal Bank to invest Rs 300 crore in Yes Bank

What central banks did this week as the virus hit global markets

As Wall Street reels, veterans recall 87 while the young look to textbooks

Dalal Street week ahead: Dont chase technical pullback; let the bottom form

Oil slump worsens lowflation risks central banks cant ignore

Eldeco Housing and Industries sells 100% stake in Swarnim Nirman

World about to learn if $1 trillion rally in tech firms was a good idea

Stock Analysis, IPO, Mutual Funds, Bonds & More

World about to learn if $1 trillion rally in tech firms was a good idea

As many as 26 constituents of Nasdaq 100 index are due to report quarterly results this week.

Companies in the Nasdaq 100 are headed into earnings season with momentum that approaches the unprecedented, their value up by more than $1 trillion since October.

Now the world finds out if the rally made any sense.

Twenty-six constituents are due to report quarterly results next week, including three of the four biggest U.S. companies, over one blistering 48-hour stretch starting Tuesday. With trillion-dollar-plus market capitalizations and a doubling in Apple Inc. since 2018 to account for, its possible investors will be in a less-forgiving mood than usual.

As things stand now, Nasdaq stocks are perched at the highest forward valuation since 2007 and investors are getting progressively less patient with failure. Already this reporting season, companies in the broader market whose sales and earnings trailed analyst estimates have seen their shares pummeled the next day by the most in five quarters.

The market isnt going parabolic, but some of these tech stocks really have, said Randy Frederick, a vice president of trading and derivatives atCharles Schwab. If you miss the bar, youre going to get punished, no question about that.

A four-day week before the landing of big tech earnings saw the Nasdaq 100 slip 0.4% as stocks wavered amid concern over the spread of a virus that started in China. Seven straight weeks of gains have pushed the index to 23 times its forecast earnings, about 30% higher than its 10-year average. That valuations are stretched doesnt mean stocks cant rally further. It does raise the drama headed into earnings season.

The latest leg of the bull market has come at a time when overall earnings have stopped rising for most industries — the reason valuations have swelled so much. While the index rose every quarter of 2019 in terms of price, profits fell in two and are now forecast to contract in a third. Given the Nasdaq surged 38%, investors have obviously been OK looking past those numbers. But any indication that 2020s expectations are optimistic may be taken poorly by stock bulls.

That dynamic is writ large in the tech industry, where earnings have dropped 3% or more in each of the past three quarters. Computer and software makers are expected to post a 0.8% profit contraction in the three months through December. Early returns have been encouraging.Texas Instruments, a bellwether for chip stocks, posted results that topped estimates. Intel Corp. reported sales guidance that came in above industry trends.

Despite the recent quarterly hiccups, combined net income of five largest tech companies — Apple, Amazon, Microsoft, Alphabet and Facebook — totaled $40 billion in the third quarter, 38% above the same period two years ago.

Multiples have expanded, but quarter-over-quarter these companies continue to grow earnings and thats the whole key, said Gary Bradshaw, a Texas-based portfolio manager at Hodges Capital Management, who owns shares of Apple, Microsoft, Amazon and Facebook. Its one of the areas in the marketplace where youre seeing good growth. This isnt 1999 or 2000 when you were valuating those tech stocks on eyeballs.

The cost of falling short has risen as well. A broader gauge of tech, online retail and Internet services stocks dropped 0.9% the day after reporting a miss on second-quarter sales and earnings per share, data compiled byCredit Suisseshow. In the third quarter, the average slump was 6.8%.

Apple will release quarterly figures on Tuesday, and analysts are focused on how the firm fared during the holiday season and dealt with uncertainty around tariffs. Microsoft, up 62% since the start of 2019, reports Wednesday. Investors will see whether the demand for its cloud-computing programs remains strong. Facebook, which has rallied 66% over that stretch, reports the same day.

Id expect a little more leadership out of value-oriented sectors, more economically sensitive parts of the market, Jeff Kleintop, chief global investment strategist at Schwab Center for Financial Research, said by phone. I think investors seem to be comfortable with sticking with the leaders that got them here, at least for the time being,

Why follow tips? Choose your winners rationally in 3 simple steps!

What gave Sensex a 4,700-point lift from days lows? Its short covering, stupid

3-year lock in for YES Bank shareholders unprecedented; may invite legal tussle

Dont wait for market bottom; hit buy when market freezes!

SBI Cards IPO Allotment Status: Heres how to check

Mukesh Ambani, Premji, Kotak, Mittals wealth hit by market crash; but Damani is still smiling

Copyright © 2020 Bennett, Coleman & Co. Ltd. All rights reserved. For reprint rights:Times Syndication Service

World about to learn if $1 trillion rally in tech firms was a good idea

YES Bank Q3 results: Bank reports record loss of Rs 18,564 crore in Dec quarter

Federal Bank to invest Rs 300 crore in Yes Bank

What central banks did this week as the virus hit global markets

As Wall Street reels, veterans recall 87 while the young look to textbooks

Dalal Street week ahead: Dont chase technical pullback; let the bottom form

Eldeco Housing and Industries sells 100% stake in Swarnim Nirman

Yes Banks potential foreign investors seek tax immunity

How to use valuation ratios like PE, EPS, PBV for stock selection

Direct banks to allow cryptocurrency trade: Firms to RBI

Bandhan Bank to invest Rs 300 crore in YES Bank

To see your saved stories, click on link hightlighted in bold