ATVI

The last week was quite eventful for stock market investors as big-ticket corporate earnings were released, in addition to job numbers and details of the latest FOMC meeting. Shares have made a stellar comeback since the start of 2023, as the S&ampP 500 index has surged 8.2% year to date, making it among the top-performing asset classes this year.

Comparatively, gold prices have surged 5.6% while high-yield corporate bonds, investment-grade corporate bonds, and government bonds have gained 4.6%, 4.5%, and 3.4%, respectively, in 2023.

Let’s see what will impact the performance of the S&ampP 500 this week.

S&ampP 500 earnings season gains pace

Last week big tech companies, including Apple (NASDAQ: AAPL), Amazon (NASDAQ: AMZN), and Meta Platforms (NASDAQ: META), reported quarterly results for Q4 of 2022. While Amazon reported its first full-year loss in 2022 in more than eight years, Apple, too, failed to meet consensus estimates. Shares of Meta, however, experienced an uptick despite billion-dollar losses posted in 2022 due to its focus on lowering operating expenses.

Most tech stocks continue to trade significantly below all-time highs as they are impacted by lower enterprise spending and tepid consumer demand due to a macroeconomic slowdown, rising interest rates, and elevated inflation levels.

However, the tech-heavy Nasdaq Composite gained 3.3% in the last five trading sessions, which is the longest streak for the index since November 2021. Nasdaq is, in fact, up a solid 15% this year.

Around 230 S&ampP 500 companies have reported earnings for Q4, and 70% of them have outpaced Wall Street estimates, comparatively higher than the historical average of 66%. The best-performing sectors include energy and industrials, where earnings have spiked 60.4% and 40.7%, respectively, in the December quarter. Alternatively, communication services and materials have seen adjusted earnings fall by 24% and 20%, respectively in Q4 of 2022.

This week will see giants such as The Walt Disney Company (NYSE: DIS), Activision Blizzard (NASDAQ: ATVI), and Pepsi (NASDAQ: PEP) report Q4 results, among several others.

Analysts expect Disney’s earnings to fall by 35% compared to the year-ago period to $0.69 per share, while sales might increase 7% to $23.33 billion in Q4.

Consumer sentiment updates

The University of Michigan will publish its preliminary Consumer Sentiment Index reading for the month of February. This metric provides us with insights into consumer confidence. In recent months, consumer sentiment has improved due to a deceleration in inflation rates. Last year, inflation levels peaked in June to 40-year highs.

The index touched an all-time low in June, which was below the previous record set during the financial crash of 2008 and the stagflationary period seen during the 1970s. But consumer spending can also remain subdued due to fears of a recession and the rising cost of debt.

The United Kingdom’s Office for National Statistics will also publish GDP figures for Q4 of 2022 this Friday. A report from Investopedia states, “The U.K. economy is projected to have stagnated after declining 0.3% in the previous quarter, as rising interest rates and persistently high inflation weigh on the economy.”

It added,  “Year-over-year, GDP likely rose just 0.4%, decelerating from a 1.9% increase in the third quarter. The U.K. economy is projected to shrink 0.6% in 2023, according to the latest forecast from the International Monetary Fund (IMF). It is the only G-7 economy projected to contract this year.

Activision Blizzard (NASDAQ:ATVI)
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