As we delve into the financial dynamics of Big Tech, the recent trends in their earnings paint a fascinating picture. A significant observation is that out of seven major Big Tech companies, five have witnessed upward earnings estimate revisions for the last quarter and the entirety of 2024. Over the past three months, these adjustments have been notably positive, with average increases of 6.7% for the last quarter and 4.9% for 2024. This is a stark contrast to the general trend seen in the S&P 500, which experienced a decrease of 7.1% and 1.3% respectively in the same periods.

A noteworthy development has been the narrowing gap between earnings and price action. This change is primarily attributed to the year-end rally, suggesting a more optimistic outlook from investors towards these tech giants.

The quarterly growth of the S&P 500’s earnings per share (EPS) year-over-year also shows promising signs. This upward trajectory indicates a robust financial performance across the board, not just confined to the technology sector.

However, it’s not all smooth sailing. The estimates for Q4’23 have seen notable reductions, particularly in the US. This adjustment suggests a recalibration of expectations, possibly due to various market and economic factors influencing company performances.

JPMorgan’s Dubravko Lakos-Bujas highlights a critical aspect of this earnings season. He points out that stocks are currently facing a high bar. In his words: “…we see stocks facing a high bar — during this earnings season, anything short of strong corporate guidance re-affirming current high growth expectations is likely to be penalized.” This statement underscores the importance of robust corporate guidance in maintaining investor confidence and meeting the high growth expectations.

With only 10% of the S&P 500 having reported their earnings, the initial results are somewhat concerning. The beat rate stands at a mere 65.4%, which is alarmingly low. In fact, it’s the second-worst rate since 2016, only surpassed by the downturn experienced during the 1Q20 lockdowns.

In summary, while Big Tech companies have shown promising upward revisions in their earnings estimates, the broader market, especially as reflected in the early S&P 500 reports, presents a mixed picture. The upcoming earnings reports and corporate guidance will be crucial in determining the market’s direction and investor sentiment. As always, it remains vital for investors to stay informed and agile in navigating these ever-evolving financial landscapes.