As Curtain Falls on Q1 Earnings, Where Do U.S. Stocks Head From Here? [Learn Premium Weekly Review]

The key Q1 earnings season for U.S. stocks is coming to a close. Coinciding with the sticky inflation data, coupled with the background of hot employment data, this round of earnings had been highly expected by the market as a catalyst to boost U.S. stocks to continue to move upward under the weakening expectations of interest rate cuts.

Indeed, during the earnings release period, U.S. stocks experienced a rebound, particularly driven by better-than-expected reports from large tech companies.

Looking back at the S&P 500 companies that have reported, over 70% exceeded revenue expectations, especially within the broader technology sector. According to FactSet data, 87% of tech sector earnings reports beat revenue forecasts for Q1.

Source: Factset Date as May.03

There were several highlights in the reports, such as the cloud computing divisions of $Amazon(AMZN.US)$, $Microsoft(MSFT.US)$, and $Alphabet-C(GOOG.US)$, which all reported strong growth in the first quarter, sending positive signals to the cloud computing industry valued at $270 billion. 🔥

Amazon's AWS saw a 17% revenue increase in Q1, while Microsoft Azure and Google Cloud also performed well, with growth of 31% and 28% respectively in the first three months of the year. Gil Luria, an analyst at D.A. Davidson & Co, believes that for AWS, Azure, and Google Cloud, it's clear that two things are happening simultaneously—AI is contributing to growth, and also cloud expenditures are accelerating.

However, can we be certain that with the support of tech giants, U.S. stocks will continue to rise? The answer may not be so definite.

Citi strategists note that despite the recent rebound in U.S. stocks, investors lack the confidence to buy, suggesting that the market is far from entirely bullish. The recent unwinding of short positions has brought the S&P close to a net long bias, but investors seem reluctant to increase their existing bullish positions. Analysts also note that valuations will continue to be a major challenge for the tech sector.

In addition to tech stocks, the other US stock booster, AI chips, are not exactly doing well in this earnings season round, with $ASML Holding(ASML.US)$, $Taiwan Semiconductor(TSM.US)$, $Advanced Micro Devices(AMD.US)$, $Intel(INTC.US)$, and $Astera Labs(ALAB.US)$ experiencing significant drops post-earnings reports.

The industry leader, $NVIDIA(NVDA.US)$, is set to release its earnings on May 22 after the market closes, which could reveal more insights.

So, in this week's premium lesson, we also focused on methods related to AI chips, covering stock picking, timing, and stop-loss strategies, Just an example that can be applied to other topics.

1. Quickly identify stocks in related sectors through thematic sectors.