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 Big tech names set to report next week include Intel Corp and Yahoo
Inc on Tuesday; eBay Inc on Wednesday and Google Inc on Thursday.
The tech sector has the highest projected earnings growth rate among
the 10 S&P sectors for the second quarter at 12.3 percent, its best
quarter since the first quarter of 2012. This forecast marks a sharp
rebound from a drop of 3.2 percent just a year ago, according to a
Thomson Reuters poll.
Goldman Sachs analysts wrote in a note that the information
technology sector "appears to be the most undervalued sector,"
giving investors more reasons to be bullish on tech stocks.
The implied earnings-per-share growth for the tech sector has been
5.4 percentage points above the S&P 500 on average over the past 10
years, but it is now just 1.0 percentage point above the benchmark
index, according to the Goldman Sachs note.
While the Dow Jones industrial average and the S&P 500 have hit
record highs recently, the tech-heavy Nasdaq is still more than 700
points away from its all-time intraday high on March 10, 2000,
suggesting to some investors that the sector may have more room to
the upside.
The tech sector's earnings are "going to certainly be important
because the market started to gain momentum as economic data got
better," said Quincy Krosby, market strategist at Prudential
Financial, which is based in Newark, New Jersey.
"We want to hear good solid numbers and if we get that from tech
names, it will help."
Nine of the 13 sub-industries in the tech sector are expected to
report higher earnings than a year ago, with semiconductors and
semiconductor equipment having the highest growth rates within the
sector, according to Thomson Reuters data.
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The Nasdaq is up 5.7 percent for the year, while the semiconductor
index is up 20.3 percent.
BIG BANKS IN THE SPOTLIGHT
Among the 10 S&P 500 sectors, financials have the worst earnings
forecast with a decline of 3.5 percent from a year ago, according to
Thomson Reuters data. Nine of the sector's 21 sub-industries are
expected to post a drop in earnings.
Earnings from some of major banks next week will include JPMorgan
Chase & Co and Goldman Sachs Group Inc on Tuesday; Bank of America
Corp on Wednesday and Morgan Stanley on Thursday.
Analysts are expecting subdued results because a slowdown in revenue
from mortgage refinancing and trading is offsetting gains from other
areas like investment banking and money management. Higher legal,
regulatory and compliance costs are also weighing on results.
Wells Fargo & Co on Friday underscored some of those problems as the
largest U.S. mortgage lender reported a 39 percent decline in
revenue from that business.
In addition to keeping a close watch on earnings, Wall Street will
also tune in next week to what Federal Reserve Chair Janet Yellen
says when she makes a couple of trips to Capitol Hill. She is
scheduled to testify on the U.S. central bank's monetary policy in a
semi-annual appearance before the Senate Banking Committee on
Tuesday and the House Financial Services Committee on Wednesday.
(Reporting by Angela Moon; Editing by Jan Paschal)
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