NEW YORK- A bevy of major US earnings reports this week led by Apple, Microsoft and Facebook could help technology and growth stocks reassert their dominance after a recent run by banks, energy and other potential beneficiaries of an economic reopening.
After leading markets higher for most of 2020, technology-related stocks took a backseat late last year to so-called value or cyclical plays, whose businesses are expected to gain the most from the economic revival promised by vaccines against COVID-19.
That shift has stalled in recent days as investors weighed lackluster outlooks from big banks and a blockbuster quarterly report from Netflix that lifted its shares by 17 percent. The Russell 1000 growth index was up 3.3 percent in the past week as of Friday morning, while its value counterpart fell 1.5 percent.
Next week’s crop of fourthquarter results – with about a quarter of the S&P 500 reporting – could help determine whether there surgence in growth stocks will continue, potentially threatening the recent rally in value and cyclical shares, said Chuck Carlson, chief executive officer at Horizon Investment Services.
“That is probably going to be the story of earnings season,” he said. “What will earnings mean in terms of the sustainability of this rotation that has occurred in the last eight, nine weeks.”
Steady growth and resilience in the face of the coronavirus pandemic made technology stocks desirable to investors, who poured money into the sector as widespread lockdowns devastated swaths of the US economy.
But a resumption in tech outperformance could also revive concerns over investor crowding into popular names. The biggest five technologyrelated companies account for about 22 percent of the weight of the S&P 500.
