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<\/a><\/p>\nThe Nasdaq 100 has risen 10% from its June low, and recently broke above its 50-day moving average for the first time since April, a positive signal for near-term momentum. It is on track for its biggest one-month percentage gain since October but remains down about 25% this year.<\/p>\n
The yield on the 10-year Treasury is below 2.8%, down from a June peak of almost 3.5%.<\/p>\n
The Fed\u2019s meeting comes in a busy week for earnings. Apple Inc, Amazon.com Inc, and Facebook parent Meta Platforms Inc are all scheduled to report this week.<\/p>\n
So far this earnings season, about 80% of technology companies in the Nasdaq 100 have reported better-than-expected earnings and revenue, according to data compiled by Bloomberg.<\/p>\n
Of course, the macroeconomic backdrop remains a key factor behind earnings and corporate outlooks. Matt Calkins, the chief executive officer of enterprise software company Appian Corp, is so concerned about inflation that he wants the Fed to be extremely aggressive, raising rates by 100 or 125 basis points.<\/p>\n
\u201cWe need to either get inflation back in the box, down to 2% again, or we will need to end up with some kind of long-term acceptance of higher inflation,\u201d he said in a phone interview. A recession is inevitable, he said, and \u201cthe main issue is whether we will still have inflation on the other end.\u201d<\/p>\n
Some investors are also concerned that earnings estimates and stock prices don\u2019t yet reflect the full effect of a slowing economy triggered by higher rates. The Nasdaq 100 is trading at 20.8 times forward earnings, slightly above its 10-year average.<\/p>\n
However, if consensus estimates continue moving lower, as they are expected to, that multiple might be deceptively low. Last week, Bank of America Corp. warned that the technology sector hasn\u2019t priced in a full recession, and that it may have further room to fall.<\/p>\n
Anthony Saglimbene, global market strategist at Ameriprise Financial, said that tech stocks still look expensive, and that there are a number of risks to the downside.<\/p>\n
\u201cTech probably can\u2019t move too high so long as the Fed is aggressively moving rates up,\u201d he said, adding that he is overweight the sector for its long-term prospects. \u201cIf the market is wrong about the economy moving into a recession, then I think you\u2019ll see growth in tech really propel higher.\u201d<\/p>\n
The cross-currents between the macro backdrop and how companies are faring in it reinforces how this earnings season could be pivotal for the market\u2019s prospects.<\/p>\n
Nicholas Colas, co-founder of DataTrek Research, was blunt in his assessment on what will drive trading. \u201cOnly earnings truly matter,\u201d he wrote. \u201cOther issues are simply sidebars to that main narrative.\u201d<\/p>\n