April 26, 2022

Wall Street Focuses On Big Tech. Today Google And Facebook.

Over the next three days, we will get the earnings reports from the heart and soul of this stock market.

Today, both Alphabet Google, the world's largest search engine, and Microsoft, perhaps the world's largest software company will reveal their latest results.

Followed tomorrow by Facebook, and then online retailer Amazon, and computer maker Apple follow on Thursday.

Perhaps it's only fitting then that Elon Musk announced his takeover of another one of these technology companies, Twitter, in a deal estimated to be worth $44 billion dollars.

Just how much money are these tech giants worth anyway. Well, let me put it this way. If you added up the market capitalization of the top five tech companies: Apple, Amazon, Alphabet Google, Microsoft, and Facebook, you'd get, depending on how the stock market closed, nearly $9 trillion in total value.

Assuming that you'd like to purchase those five companies, it would take the total income of every man, woman, and child in the US working for nearly half a year to save enough to make that purchase.

It is an incredible concentration of wealth, and I might add power. In the corporate offices of a relatively few.

As a group, the tech stocks have been as upbeat and positive as the market over the last decade. Take a look at the 10-year chart for both the companies reporting today: Alphabet and Microsoft. It's as if you drew a line from the lower left-hand corner of the page to the upper right-hand corner. It's been up, up, and way.

Pluses everywhere.

Except for this month. This April has seen a marked drop for both. As, the market, as a whole, has suffered in April.

This afternoon, we'll see if there are some fundamental reasons behind this drop. Much of Wall Street seems to think there's more to this swoon than just a momentary case of the jitters.

On Thursday we will see the first release of GDP for the first quarter. And you can forget that 6.9% growth we saw in the last quarter of 2021. The Street officially is looking for a GDP Growth rate of just 2%. And most estimates lately say: “make that 1% GDP Growth.” Or in other words, we're slipping into near-recession numbers.

And if there's one thing that's for sure: the Tech companies are not going to be immune if we're having that kind of slowdown.

Today, analysts are mixed in their review of these two companies. For Alphabet Google, the Street is looking for earnings per share to drop by about 2 1/2%. While at Microsoft they are looking for a nearly 10% improvement in earnings.

We'll have to wait until this afternoon to see just how close the street is with these estimates.

But I suppose the real importance of the next couple of days, will be to see if these tech giants can once again take up the mantel, and lead this economy to higher ground.

There is a lot of trepidation right now, both on Wall Street and on Main Street. Concerns about the safety of our Country in a time of war. Concerns about the health of our loved ones in a time of Pandemic. Concerns about food in light of shortage. And concern about money in a time of extreme inflation.

We've all seen the opinion polls, which show that a growing majority of Americans believe the country is not headed in the right direction.

By Thursday evening we'll be able to see if investors have one more thing to worry about in that growing list of concerns...