Coming up this week: Big Tech Earnings, First-Quarter GDP, Housing Market Update


Coming up this week: Big Tech Earnings, First-Quarter GDP, Housing Market Update

U.S. equity markets had their worst single-day decline on Friday since 2020 on the heels of comments by Federal Reserve Chair Jerome Powell that the Fed would consider more aggressive interest rate hikes at its May meeting, in addition to weaker-than-expected earnings reports. The Dow and S&P 500 finished Friday's session 2.8% lower, while the Nasdaq fell 2.6%. The Dow notched its fourth consecutive weekly loss, and the S&P 500 posted its third. For the week, the Dow fell 1.9%, the S&P 500 shed 2.8%, and the Nasdaq declined 3.8%. Meanwhile, the yield on the 10-year Treasury note rose to a fresh three-year high just under 3%, as the global bond market sell-off continued. Crude oil prices fell early in the week, before stabilizing to end the week near $102 per barrel. Next week may be the busiest of the corporate earnings season, with dozens of prominent companies across various market sectors reporting earnings, including five of the largest technology companies in the U.S., as Apple, Amazon, Microsoft, Meta Platforms, and Google all report earnings. We can also expect updates on the U.S. housing market, along with the preliminary estimate for first-quarter GDP growth. The February update to the Case-Shiller National Home Price Index and March new home sales will be released Tuesday, followed by pending home sales on Wednesday.


Earnings season enters its busiest week, with tech giants Apple, Amazon, Meta Platforms, Microsoft, and Google all reporting first quarter earnings.
Further updates on the U.S. housing market are expected, with the latest figures for the Case-Shiller Home Price Index, as well as new and existing home sales.
The preliminary estimate for first-quarter GDP growth will be released Thursday, likely showing a sharp deceleration from the fourth quarter of 2021.

Earnings from Big Tech

This week, all five companies making up the popularized FAAMG acronym — Meta, Apple, Amazon, Microsoft, and Google — will be reporting first-quarter earnings. Technology stocks have had a difficult start to 2022, with most tech companies retreating from their all-time highs reached in 2021. The tech-heavy Nasdaq Composite Index is down nearly 18% year-to-date, nearly double the 10% decline in the overall market. In an environment of rising interest rates, growth stocks, which include many large tech companies, tend to be negatively affected due to higher borrowing costs. Firms classified as growth stocks tend to be highly leveraged with higher rates of cash turnover, and this debt becomes more difficult to service as interest rates rise. As a result, value stocks as well as more established, legacy companies tend to outperform growth stocks in an environment of rising rates.

Housing Market Updates

More updates to the U.S. housing market will be available this week, with the February Case-Shiller Home Price Index and March pending home sales due to be released on Tuesday and Wednesday, respectively. Tuesday’s Case-Shiller update will include both the National Index and the 20-City Composite Index measuring price gains in major metropolitan areas. In January, housing prices rose 1.4% month-over-month and 19.2% year-over-year, accelerating compared to December and just below a record annual gain of 20% in August of 2021. Price gains will likely subside over coming months, however, as rising mortgage rates and declining affordability continue to affect housing demand. Pending home sales have been declining for four consecutive months, as mortgage rates rise. Wednesday’s update will likely show a further decline as the rate on a 30-year fixed-rate mortgage surged above 5% in recent weeks.

First Quarter Growth Estimate

On Thursday, the preliminary reading for first quarter GDP growth will be released. The Conference Board forecasts that GDP growth will slow to a 1.5% quarter-on-quarter rate, or 4.3% year-over-year. This compares to a 6.9% rate of increase in the fourth quarter of 2021. Growth projections for 2022 have been revised sharply lower in recent weeks due to rising inflation driven by surging commodities prices, the prospect of more aggressive monetary policy tightening by the Fed, as well as geopolitical uncertainty following Russia’s invasion of Ukraine. Economic growth for 2022 is now projected at 3.0%, followed by a 2.2% growth projection for 2023. According to the Conference Board, rising oil prices will likely reduce GDP growth by a range of 0.3–0.8% this year, given a scenario of crude oil prices rising further. Despite ongoing challenges to the U.S. economy, the Conference Board is not forecasting a recession in 2022, positing such a scenario as unlikely.