Earnings reports from the four biggest US companies by market capitalisation in the coming week may test a nascent rally where stocks are clawing their way back from another low.
Apple, Microsoft, Google parent Alphabet and Amazon account for a combined 20 per cent of the weight of the S&P 500 and more than a third of the Nasdaq Composite.
Investors view the growth giants as bellwethers for how corporate America is faring during a year in which inflation has soared, pushing the Federal Reserve to quickly enact a series of large rate rises that bruised markets and raised fears a recession may be coming.
“If these megacaps can’t do well, then the question is: who can do well?” said Yung-Yu Ma, chief investment strategist at BMO Wealth Management.
The S&P 500 is up nearly 5 per cent from its October 12 closing low for the year after posting its biggest weekly gain since late June. Even with stocks' latest rebound, the index has dropped 21 per cent so far in 2022, on track for its biggest decline since 2008.
Resilient corporate profits have been one bright spot this year, although doubts are growing over how sustainable they will be.
With the bulk of S&P 500 companies still to report, third-quarter profits are estimated to have climbed 3.1 per cent versus the year-ago period, which would be the weakest performance in two years, according to Refinitiv, while earnings growth expectations for 2023 have fallen to 7.2 per cent from 7.8 per cent on October 1.
Next week's reports from the four megacaps may show whether companies with dominant positions can post solid performance despite worries of an economic downturn.
Because of their heavy weightings, “if those stocks don’t get it done, that puts pressure on the indices to continue to go down”, said Chuck Carlson, chief executive of Horizon Investment Services.
Microsoft and Alphabet are scheduled to report on Tuesday, with Amazon and Apple set for Thursday.
Apple shares are the only ones of the megacaps that have outperformed the broader market this year. Shares of the iPhone maker, which account for a 7 per cent weight in S&P 500, are down about 17 per cent in 2022; Microsoft and Amazon are each off roughly 28 per cent, Alphabet is down 30 per cent.
Despite those steep losses, investors have maintained exposure to the megacap stocks. Actively managed US mutual and exchange-traded funds held 11.41 per cent of their portfolios in those four stocks combined as of the most recently available data, versus 11.44 per cent at the end of 2021, according to Morningstar Direct.
Investors have been drawn to the large companies broadly because of their financial strength and competitive advantages that, in theory, will drive profits even during uncertain economic times.
Still, only Apple has topped analyst estimates for earnings and revenue in both of their most recent quarterly reports, according to Refinitiv data.
“The bar is higher for Apple because it has outperformed and because you haven’t seen the earnings blink yet,” said Walter Todd, chief investment officer at Greenwood Capital.
Questions loom over the other companies' key market areas, including personal computers for Microsoft, advertising spending for Alphabet and consumer strength for Amazon.
All three rely on cloud computing businesses, which will be in focus next week, according to Charlie Ryan, partner and portfolio manager at Evercore Wealth Management.
If these megacaps can’t do well, then the question is: who can do well?
Yung-Yu Ma,
chief investment strategist at BMO Wealth Management
“Cloud would be the pillar that one would put their hopes on when they report,” Mr Ryan said. “It has been continued strength for quite some time now and any deviation from that would be a concern.”
Meanwhile, soaring US bond yields are pressuring valuations and complicating the picture for tech and other growth stocks, whose expected future earnings are discounted steeply by higher yields. Yields continued to rise this week, with the yield on the benchmark 10-year Treasury note hitting a 14-year high.
All four stocks command higher valuations than the S&P 500, which trades at nearly 16 times forward earnings estimates. The price-to-earnings ratio for Apple and Microsoft are both about 22 times, Alphabet trades at 17.5 times, while Amazon sits at 60 times, according to Refinitiv Datastream.
“Those stocks have typically sold at earnings multiples that are on the higher side,” said Mr Carlson. “How they are going to continue to perform from here gives some insight into what investors are ultimately willing to pay for growth stocks.”
Your rights as an employee
The government has taken an increasingly tough line against companies that fail to pay employees on time. Three years ago, the Cabinet passed a decree allowing the government to halt the granting of work permits to companies with wage backlogs.
The new measures passed by the Cabinet in 2016 were an update to the Wage Protection System, which is in place to track whether a company pays its employees on time or not.
If wages are 10 days late, the new measures kick in and the company is alerted it is in breach of labour rules. If wages remain unpaid for a total of 16 days, the authorities can cancel work permits, effectively shutting off operations. Fines of up to Dh5,000 per unpaid employee follow after 60 days.
Despite those measures, late payments remain an issue, particularly in the construction sector. Smaller contractors, such as electrical, plumbing and fit-out businesses, often blame the bigger companies that hire them for wages being late.
The authorities have urged employees to report their companies at the labour ministry or Tawafuq service centres — there are 15 in Abu Dhabi.
The specs
Price: From Dh180,000 (estimate)
Engine: 2.0-litre turbocharged and supercharged in-line four-cylinder
Transmission: Eight-speed automatic
Power: 320hp @ 5,700rpm
Torque: 400Nm @ 2,200rpm
Fuel economy, combined: 9.7L / 100km
Evacuations to France hit by controversy
- Over 500 Gazans have been evacuated to France since November 2023
- Evacuations were paused after a student already in France posted anti-Semitic content and was subsequently expelled to Qatar
- The Foreign Ministry launched a review to determine how authorities failed to detect the posts before her entry
- Artists and researchers fall under a programme called Pause that began in 2017
- It has benefited more than 700 people from 44 countries, including Syria, Turkey, Iran, and Sudan
- Since the start of the Gaza war, it has also included 45 Gazan beneficiaries
- Unlike students, they are allowed to bring their families to France
Moon Music
Artist: Coldplay
Label: Parlophone/Atlantic
Number of tracks: 10
Rating: 3/5
Company%20profile
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The specs
Engine: 2.0-litre 4-cyl turbo
Power: 201hp at 5,200rpm
Torque: 320Nm at 1,750-4,000rpm
Transmission: 6-speed auto
Fuel consumption: 8.7L/100km
Price: Dh133,900
On sale: now
Our family matters legal consultant
Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
The%20specs%3A%202024%20Mercedes%20E200
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Red flags
- Promises of high, fixed or 'guaranteed' returns.
- Unregulated structured products or complex investments often used to bypass traditional safeguards.
- Lack of clear information, vague language, no access to audited financials.
- Overseas companies targeting investors in other jurisdictions - this can make legal recovery difficult.
- Hard-selling tactics - creating urgency, offering 'exclusive' deals.
Courtesy: Carol Glynn, founder of Conscious Finance Coaching
Killing of Qassem Suleimani
Most sought after workplace benefits in the UAE
- Flexible work arrangements
- Pension support
- Mental well-being assistance
- Insurance coverage for optical, dental, alternative medicine, cancer screening
- Financial well-being incentives
OPTA'S PREDICTED TABLE
1. Liverpool 101 points
2. Manchester City 80
3. Leicester 67
4. Chelsea 63
5. Manchester United 61
6. Tottenham 58
7. Wolves 56
8. Arsenal 56
9. Sheffield United 55
10. Everton 50
11. Burnley 49
12. Crystal Palace 49
13. Newcastle 46
14. Southampton 44
15. West Ham 39
16. Brighton 37
17. Watford 36
18. Bournemouth 36
19. Aston Villa 32
20. Norwich City 29
COMPANY%20PROFILE%20
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England 12-man squad for second Test
v West Indies which starts Thursday: Rory Burns, Joe Denly, Jonny Bairstow, Joe Root (captain), Jos Buttler, Ben Stokes, Moeen Ali, Ben Foakes, Sam Curran, Stuart Broad, Jimmy Anderson, Jack Leach
The Voice of Hind Rajab
Starring: Saja Kilani, Clara Khoury, Motaz Malhees
Director: Kaouther Ben Hania
Rating: 4/5
Tonight's Chat on The National
Tonight's Chat is a series of online conversations on The National. The series features a diverse range of celebrities, politicians and business leaders from around the Arab world.
Tonight’s Chat host Ricardo Karam is a renowned author and broadcaster with a decades-long career in TV. He has previously interviewed Bill Gates, Carlos Ghosn, Andre Agassi and the late Zaha Hadid, among others. Karam is also the founder of Takreem.
Intellectually curious and thought-provoking, Tonight’s Chat moves the conversation forward.
Facebook | Our website | Instagram
War 2
Director: Ayan Mukerji
Stars: Hrithik Roshan, NTR, Kiara Advani, Ashutosh Rana
Rating: 2/5
Conflict, drought, famine
Estimates of the number of deaths caused by the famine range from 400,000 to 1 million, according to a document prepared for the UK House of Lords in 2024.
It has been claimed that the policies of the Ethiopian government, which took control after deposing Emperor Haile Selassie in a military-led revolution in 1974, contributed to the scale of the famine.
Dr Miriam Bradley, senior lecturer in humanitarian studies at the University of Manchester, has argued that, by the early 1980s, “several government policies combined to cause, rather than prevent, a famine which lasted from 1983 to 1985. Mengistu’s government imposed Stalinist-model agricultural policies involving forced collectivisation and villagisation [relocation of communities into planned villages].
The West became aware of the catastrophe through a series of BBC News reports by journalist Michael Buerk in October 1984 describing a “biblical famine” and containing graphic images of thousands of people, including children, facing starvation.
Band Aid
Bob Geldof, singer with the Irish rock group The Boomtown Rats, formed Band Aid in response to the horrific images shown in the news broadcasts.
With Midge Ure of the band Ultravox, he wrote the hit charity single Do They Know it’s Christmas in December 1984, featuring a string of high-profile musicians.
Following the single’s success, the idea to stage a rock concert evolved.
Live Aid was a series of simultaneous concerts that took place at Wembley Stadium in London, John F Kennedy Stadium in Philadelphia, the US, and at various other venues across the world.
The combined event was broadcast to an estimated worldwide audience of 1.5 billion.
Infiniti QX80 specs
Engine: twin-turbocharged 3.5-liter V6
Power: 450hp
Torque: 700Nm
Price: From Dh450,000, Autograph model from Dh510,000
Available: Now
more from Janine di Giovanni
AI traffic lights to ease congestion at seven points to Sheikh Zayed bin Sultan Street
The seven points are:
Shakhbout bin Sultan Street
Dhafeer Street
Hadbat Al Ghubainah Street (outbound)
Salama bint Butti Street
Al Dhafra Street
Rabdan Street
Umm Yifina Street exit (inbound)
