If Big Tech earnings deliver, the bull run gets fresh legs
It's tempting to call this a pause for breath—but make no mistake, what follows could determine whether bulls stay in control.
With 59 S&P 500 companies already reporting and a staggering 86% surpassing estimates, according to FactSet's latest, the bar being set is high. It's a message: optimism is winning, but only if it endures.
ADVERTISEMENT
The spotlight now turns to the elite of the elite: Alphabet and Tesla. These two giants, part of the so-called 'Magnificent Seven,' are poised to set the tempo. FactSet forecasts these mega-caps will deliver about 14% year-on-year growth, dwarfing the modest 3.4% gain expected from the remaining 493 S&P members. If they execute, markets could ride that booster straight into orbit.
Look at Alphabet first. Here's a conglomerate that dominates search, YouTube, cloud, and is now making serious AI inroads. Analysts expect around 15% growth in earnings, with cloud revenue expanding in double digits. That's robust by any standard.
However, the test will lie in translating AI investment into sustained profit, and avoiding regulatory traps that could dampen its shine.
Then there's Tesla, which is a polarizing force in the EV and tech arenas. Yes, deliveries are down about 13.5% year-over-year, and earnings are estimated to fall roughly 19–20%, with EPS north of $0.40.
But Elon Musk is doubling down, reportedly sleeping in the office, laser-focused on robotaxi and tech updates. If he delivers on those fronts, sentiment could swing sharply positive, even if top-line figures remind investors of lumpiness in the core auto business.
This is why this phase of earnings feels nothing like a routine check-in. We're perched on a razor's edge: confirmation that growth remains intact—or the first sign that valuations teeter on thin air.
The S&P's forward P/E sits around 22.2, higher than its five- and 10-year norms of 19.9 and 18.4, respectively. That's a premium tied to performance. With 19 quarters of revenue growth already behind us, it's time for proof that earnings can keep pace.
The message from the banks so far paints a picture: financials and healthcare are lifting earnings, while sectors like energy are lagging. But if Alphabet or Tesla stumble, it could offset gains and invite a broader reassessment. Conversely, if they deliver, and perhaps outperform, this rally gains fresh legs.
Why is this crucial? Because the backdrop remains complex. Tariff chatter, Fed policy shifts, geopolitical worries, they're all still in play. But right now, the market isn't fixated on macro headlines. It's banking on this micro foundation: corporate earnings. A strong season builds confidence that transcends volatility.
It's about narrative, too. When the S&P hits new heights just as earnings season begins, there's a constancy in the story. It's not just that the market is high, it's that earnings are expected to follow suit. Beat expectations, and that narrative deepens; miss them, and the rally becomes vulnerable to challenges.
So, here's where we stand: the Opening Act is strong. Momentum is palpable. But what matters most is what happens next. Can the Magnificent Seven deliver? Will Alphabet stave off AI disruption and regulatory spanners? Can Tesla quell concerns about shrinking deliveries and keep investor passion alive through its tech ambition?
Their answers will echo far beyond their own results; they'll shape how investors view the entire S&P.
So buckle up. This week's script will write the next chapter in the bull story. No one wants to see forceful resistance here. The market's high ambitions demand high execution. If that comes, the journey upward continues.
Nigel Green is deVere CEO and Founder
Also published on Medium.
Notice an issue? Arabian Post strives to deliver the most accurate and reliable information to its readers. If you believe you have identified an error or inconsistency in this article, please don't hesitate to contact our editorial team at editor[at]thearabianpost[dot]com. We are committed to promptly addressing any concerns and ensuring the highest level of journalistic integrity.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Al Etihad
16 minutes ago
- Al Etihad
Tesla shares fall 8% after reporting profit drop
24 July 2025 19:04 NEW YORK (AFP)Tesla shares tumbled more than eight percent early Thursday after it reported lower profits and CEO Elon Musk warned the company faced more potentially "rough" quarters 1350 GMT, Tesla shares were at $30.50, down 8.1 percent. Tesla reported second-quarter profits of $1.2 billion, down 16 percent from the year-ago level, its third quarter in a row in which profits fell.
Gulf Today
an hour ago
- Gulf Today
5 years after COVID, pharma shares languish
Global healthcare stocks have not been this cheap in decades and fund inflows into the sector are picking up, yet the shares remain in the doldrums, highlighting uncertainty over drug pricing policies since Donald Trump returned to the White House. Pharma companies' earnings outlook is being obscured by concerns over revived "most-favored-nation" drug pricing rules in the lucrative US market and potential 200% tariffs on pharma imports into the US. Money flooded into drugmakers' shares during the COVID-19 pandemic but more recently there has been an exodus as investors shifted into Big Tech, leaving the sector cheap but unloved, reported Reuters. At 15.9 times forward earnings, healthcare trades 11% below its long-term average and 20% below global equities, its steepest discount in 16 years, just above a record discount in 2009, based on LSEG Datastream data. "We've moved from cautious optimism to cautious pessimism," said Stephanie Aliaga, global market strategist at J.P. Morgan Asset Management in New York. "Valuations have gotten even cheaper, but for a reason," she added, referring to intensifying US policy risks. But some investors are starting to look past the Washington policy fog and at long-term positive drivers, such as aging populations, RNA-based therapeutics, and breakthroughs in weight-loss and diabetes drugs, Reuters reported. Alberto Conca, CIO at Swiss wealth manager LFG+ZEST, has been adding exposure to pharma, biotech and medtech in recent weeks, drawn by strong cash-flow yields and the prospect of US rate cuts boosting this rate-sensitive sector. Interest rate cuts typically support healthcare by lowering R&D funding costs and boosting the value of future cash flows. "These are quality companies with good growth and defensive features being priced as if we're heading into an 'Armageddon scenario', which I believe is unlikely," he said. UK-based M&G Investments has also been selectively adding to healthcare, according to its latest allocation report. Healthcare funds have seen net inflows since 2024, more than reversing the outflows from late 2022 through 2023, fund tracker EPFR data shows. Although year-to-date, inflows total $7.2 billion, down 41% from last year. Innovation is accelerating, pipelines are maturing and M&A is showing signs of picking up — yet stock prices are unmoved. Whether that represents a buying opportunity or a value trap hinges on how and when the policy uncertainty clears, investors said. Historically, healthcare has traded at a modest premium to world stocks, thanks to its defensive profile and steady earnings. But that narrative has unravelled under political pressure from Washington and investors' love of Big Tech. Over the past three years, US healthcare has underperformed the S&P 500 by more than 60 percentage points, making it the worst sectoral performer on Wall Street. Its valuation has deepened to a near-record 27% discount, from parity to the S&P in 2023. "Markets don't like uncertainty, and that shows up in valuations," said Eddie Yoon, healthcare sector leader and portfolio manager at Fidelity Investments in Boston. "Being cheap isn't necessarily a reason to buy. You need a catalyst." For now, that catalyst is elusive. The policy uncertainty makes it difficult to forecast future earnings, he said, though he hopes for more clarity by year-end - potentially also paving the way for more M&A in the industry. Talks with the Trump administration have yet to clarify how and when drug prices will fall, executives from Eli Lilly and Merck said at a May industry conference.
Zawya
2 hours ago
- Zawya
Wall St set for mixed start as investors digest Alphabet, Tesla results
Wall Street was on track for a mixed open on Thursday as investors digested uneven earnings from megacaps like Alphabet and Tesla and monitored progress in U.S. trade negotiations. Alphabet rose 3.4% in premarket after the Google parent raised its 2025 capital spending forecast by $10 billion to $85 billion, shrugging off trade jitters, while electric vehicle maker Tesla tumbled 6.1% as CEO Elon Musk warned of "a few rough quarters" due to cuts in EV incentives. At 8:43 a.m. ET, S&P 500 E-minis were up 0.5 points, or 0.01%, Nasdaq 100 E-minis were up 42 points, or 0.18%, and Dow E-minis were down 292 points, or 0.65%. UnitedHealth fell 4.5%. The insurer said it is cooperating with the Department of Justice's formal criminal and civil requests following reports of investigations into its Medicare participation. The S&P 500 and the tech-heavy Nasdaq soared to record closes on Wednesday as investors cheered reports of an imminent trade deal between Washington and the European Union. Meanwhile, the Dow closed over 1.1% higher, just below its all-time peak. An EU spokesperson on Thursday signaled that a deal was "within reach", which, as per diplomats, would result in broad 15% import tariffs on the 27-member bloc. Anticipation of further trade pacts was also reinforced by President Donald Trump's announcement of a deal with Japan on Tuesday, cutting import levies on the Asian country to just 15%. Meanwhile, China and South Korea are racing to strike agreements to dodge Trump's hefty duties. "A U.S. tariff agreement with Japan has increased market confidence that the worst of the global trade conflict could be over, adding to hopes of a deal with the European Union," said Mark Haefele, chief investment officer, UBS Global Wealth Management. Among other stocks, American Airlines fell 3.3% after forecasting a bigger-than-expected third-quarter loss, hurt by sluggish domestic travel demand. IBM slid 6.3% as its second-quarter earnings failed to impress investors, especially due to its lower-than-expected sales in its mainstay software segment. Honeywell slipped 2.8% despite raising its annual forecasts after beating Wall Street expectations for second-quarter results. Shares of ServiceNow jumped 7.4% after the software firm raised its annual subscription revenue forecast. Markets were also monitoring developments after the White House surprised investors that Trump - fresh from stepping up his criticism of Federal Reserve Chair Jerome Powell - would pay a visit to the U.S. central bank's headquarters later in the day. With the Fed widely expected to keep rates steady at next week's meeting, traders are now eyeing a 62% chance of a September rate cut, according to CME's FedWatch tool. A Labor Department's report showed jobless claims for the week ended July 18 stood at 217,000 versus an estimate of 235,000, signalling resilience in the job market. S&P Global's flash PMI data will be released at 9:45 a.m. ET. (Reporting by Nikhil Sharma and Pranav kashyap in Bengaluru; Editing by Maju Samuel)
