EC Previewing The Tech Sector's First Full Coronavirus Earnings Season

There were no major surprises in bank earnings, but that was likely a function of very low expectations as the market was already primed for the group coming out with bulking up their loan-loss reserves and margins getting squeezed by historically low interest rates.

The market expected the big banks and brokers to show momentum in their capital markets and investment banking businesses. And we got notable upside surprises on that count from the likes of Goldman Sachs (GS), Morgan Stanley (MS) and JPMorgan (JPM).

We still have plenty of Finance earnings to come, but the focus shifts to the Technology sector, with a number of major players like Microsoft (MSFT), Intel (INTC), Texas Instruments (TXN), Twitter (TWTR) and others on deck to report results. Tech stocks have been in the vanguard of the market’s recovery from the March 23 lows and it may not be easy for these companies to satisfy the market’s lofty expectations.

As you can see below, stocks in the Zacks Technology sector are up +14.2% in the year-to-date period, handily outperforming the S&P 500 index’s breakeven showing, with Microsoft doing twice as well as the Tech sector itself.

A big reason for these stocks’ strong recent performance is the secular momentum in their underlying businesses that are least affected Covid-19 related disruptions. In fact, the pandemic has, in many cases, accelerated long-standing digitization trends that are helping big parts of the U.S. economy and workforce to operate almost normally in these otherwise abnormal times.

Today’s Microsoft has come a long way since its dominance in the PC era that relied on the company’s Windows operating system and suite of MS Office applications. The company has transformed itself into a cloud computing powerhouse and emerged as among the top three players in the space, along with Amazon (AMZN) and Google’s parent Alphabet (GOOGL). It is these cloud-based services that are allowing us to remain functional while working from homes.

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Moon Kil Woong 1 month ago Contributor's comment

People should be looking at biotech not just tech anymore as the Corona Virus being under control is the fundamental key to economic recovery.