US stock markets are heading into a pivotal week, with Big Tech earnings in focus amid ongoing concerns over tariffs and global growth.
Microsoft, Meta, Amazon, and Apple are all set to report results this week following Tesla and Alphabet last week. Still, markets are expected to start cautiously. "It could be a cautious start to the week for equities as the market focuses on US tech earnings and bank and auto results in the UK and Europe," said Kathleen Brooks, research director at XTB.
Analysts at Wedbush expect "generally very strong” results from the remaining tech cohort, citing "robust cloud spending for the hyperscalers, a rebound in digital advertising, and the AI Revolution strength" as key tailwinds.
Despite tariff uncertainty, Wedbush believes that demand trends remain “very favorable” for Big Tech."
Brooks noted that the Magnificent 7 stocks, including Microsoft, Meta, Amazon, and Apple, have underperformed this year and added, "The Magnificent 7 is expected to report a 16% increase in profits this year," but warned that "if big tech fail to follow Google and instead report weaker than expected earnings, this could be problematic for the recovery in US stocks."
While earnings optimism is high, tariff risks remain a major overhang. Wedbush called tariff uncertainty “the black cloud overhang on the tech sector," with semiconductors and Apple "in the eye of the Category 5 storm" tied to US-China trade tensions.
Apple’s earnings on Thursday are particularly in focus. "The March quarter takes a back seat to the real question for investors… what will Apple do if China tariffs stay in place and Section 232/chip tariffs hit the market?" Wedbush analysts wrote. They warned Apple’s 2025 and 2026 earnings could fall by 15% to 20% if negotiations stall, although they remain bullish, citing Apple’s 1.5 billion iPhone and 2.4 billion iOS installed base and Services business.
Wedbush remains optimistic, writing, "We continue to believe Microsoft and Amazon will both report strong cloud numbers this week with guidance that hits whisper expectations with a strong AI demand trajectory."
Tariff overhang
Broader signs of strain from tariffs are already evident. Brooks noted that US tariffs on Chinese goods, now at 145%, have "dramatically altered the landscape for financial markets" over the past month. She pointed to early signs such as rising prices at Chinese fast-fashion giant Shein and a 45% year-over-year drop in Chinese container shipments to the US.
Meanwhile, gold prices, which had surged earlier in April, have started to ease. "Investors pressed pause on its bullish run," Brooks noted, adding that "the yellow metal’s price action in the coming week could be a good indicator of overall market risk: if gold falls, then risk sentiment is strong, if it rises, risk sentiment could fall."
The dollar, which had weakened following tariff announcements, has also begun to stabilize. "There are signs that investors are starting to reverse some of their dollar short positions now that news flow is more positive about the outlook for tariffs," Brooks wrote.
Employment data to shape picture
This week’s economic data will play a critical role as the Federal Reserve heads into a communications blackout ahead of its May 7 meeting. Friday’s April employment report is key, with Deutsche Bank forecasting a slowdown to 125,000 payroll gains from 228,000 previously.
“Despite the expected downshift, the unemployment rate should remain unchanged at 4.2%,” Deutsche Bank said. They expect consumer sentiment and business indicators to decline amid rising tariffs, and warned that while growth risks are rising, so too are inflationary pressures.
"This week investors may leave tariff concerns to the politicians, and instead focus on corporate earnings,” Brooks wrote.
“If companies post weaker than expected earnings reports, this could fuel further volatility in stock markets and weigh on the US dollar, as American exceptionalism is once again challenged.”