(Updates with IBM results after the bell, Netflix's YTD gain)
By Caroline Valetkevitch
NEW YORK, April 19 (Reuters) - On the heels of blockbuster
earnings from major U.S. banks, investors are focused on whether
an upcoming batch of earnings from major technology-related
companies can sustain the season's early momentum.
Estimated year-over-year first-quarter earnings growth for
S&P 500 companies rose to 31% from 25% in the past week,
based on Refinitiv data, driven by last week's
stronger-than-expected results from Wells Fargo & Co ,
Goldman Sachs Group Inc and other banks.
Tuesday brings results from stay-at-home winner Netflix Inc
, which is part of the FAANG group of high-profile
tech-related names. Chipmaker Intel Corp's results are
due later this week.
After the bell Monday, shares of International Business
Machines Corp were up more than 2% as the company
resumed sales growth in the first quarter after a year of
declines and beat Wall Street targets.
Earnings for the technology sector , which
continued to grow last year while S&P 500 overall earnings
dropped as the pandemic took its toll on businesses and
consumers, are on track for 25% year-over-year growth in the
first quarter.
But this year, tech is expected to lag profit growth of
sectors that should benefit from the reopening of the economy,
such as financials.
First-quarter profit growth for the S&P 500 financials
sector , is now estimated at 116%, compared with 76% a
week earlier.
"Every time we go to earnings, there's always the question
of whether (tech) can keep delivering, especially in terms of
guidance," said Quincy Krosby, chief market strategist at
Prudential Financial in Newark, New Jersey.
"And they have," she said. "What you are seeing is investors
are prepared to have them - or some of them - in their
portfolios along with cyclicals."
To be sure, many strategists have been bullish on
economically focused sectors, and U.S. technology and growth
stocks have recently begun to gain again after months of being
outpaced by economically sensitive names that appear to be a
better value.
Netflix still lags the broader market. Its stock is up 2.5%
so far in 2021 after gaining 67% in 2020, when consumers
embraced at-home entertainment during the early pandemic
lockdowns, but some analysts are optimistic Netflix's strong run
is not over.
"It is reasonable to anticipate reduced engagement on the
platform as the global economy reopens," Brian White, an
internet and software analyst at Monness Crespi Hardt who
recommends buying the stock, wrote in a recent note.
"However, this crisis has acted as a catalyst in introducing
more consumers to the service and we believe this story has a
long runway of growth in the coming years."
The current cycle of rising chip demand is expected to help
semiconductors, said Daniel Morgan, senior portfolio manager at
Synovus Trust Company.
"Semiconductors are operating on all cylinders right now.
They can't make them fast enough," he said.
Micron Technology Inc shares rose when it forecast
quarterly revenue above Wall Street estimates due to a rise in
demand for memory chips, thanks to 5G smartphones and artificial
intelligence software.
As companies have more money to increase their technology
spending, that will support tech companies as well.
"With tech, either way they win. They're really in a great
position right now," Morgan said.
Microsoft Corp is expected to report April 27.
Rounding out the FAANG reports, Google parent Alphabet Inc
, Apple Inc , Facebook Inc and
Amazon.com Inc also are due to report results later
this month.
(Reporting by Caroline Valetkevitch; Editing by Alden Bentley,
Nick Zieminski and Richard Chang)
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April 20, 2021 at 04:29AM
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PREVIEW-Investors turn to growth stocks' results after strong earnings start - Reuters
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