This week is notably busy in the US earnings season, particularly for the S&P 500, which recently experienced a two-week losing streak. Key tech giants such as Meta, Microsoft, Tesla, and Apple are set to report their results, drawing considerable attention due to their contribution to the index’s overall earnings growth.
Last year, the Magnificent 7 tech companies, including Nvidia and Alphabet, contributed over 40% to the S&P 500’s total return. They are expected to report a blended earnings growth of over 20% for the past quarter, in contrast to 4.1% for the rest of the index. Despite this, they have lagged behind the S&P 500 this year, with stocks like Meta and Microsoft facing market scrutiny.
Commodity Surge Amidst Geopolitical Tensions
Commodities like gold and silver have flourished amidst geopolitical tensions and a shifting US economic stance. The iShares Silver Trust achieved a trading turnover of $40bn in a single day, positioning commodities as a focus over major tech companies. Traders anticipate significant reactions to upcoming earnings reports, particularly for Nvidia.
The KBW banking index is also struggling, as the largest US banks face declining share prices post-earnings. This suggests any missteps by the Magnificent 7 could further hinder their performance, presenting challenges for tech leaders such as Microsoft, Meta, Tesla, and Apple in reclaiming their prior influence.
The S&P 500 has just experienced its first two-week losing streak since June of last year, pulling back 3.5% from its recent highs. This backdrop of market nervousness makes this week’s Magnificent 7 earnings reports particularly crucial for setting near-term direction. With the CBOE Volatility Index (VIX) now trading around 18.5, options pricing reflects high anticipated movement.
We’ve seen a clear rotation out of big tech and into hard assets to start the year, a trend that accelerated after last year’s dollar debasement concerns. Gold futures are already up 8% in January, while the Magnificent 7 basket has underperformed, falling an average of 4% year-to-date. This divergence suggests that traders are hedging against geopolitical risks and are skeptical of tech’s continued dominance.
Earnings Anticipation for Tech Leaders
Current options pricing shows traders are bracing for significant swings following this week’s results, especially for Meta and Microsoft on Wednesday. The market is pricing in an approximate 8% post-earnings move for Meta and 6% for Microsoft, indicating higher expected volatility than for the concurrent FOMC meeting. This makes long volatility strategies like straddles or strangles look attractive for those without a strong directional bias.
The punishing earnings reports from major banks earlier this month, where strong revenue from names like JP Morgan was ignored in favor of a weak outlook, set a negative precedent. This suggests that even a minor misstep in guidance from any of the Magnificent 7 could lead to an outsized negative reaction in their stock prices. We must be prepared for the market to sell the news, even on a solid earnings beat, if the forecast is not perfect.
For Microsoft, the focus is squarely on proving its AI investments from last year can translate into revenue, particularly within its Azure cloud division. After seeing rival Amazon’s AWS growth slightly decelerate in its last report from 2025, any positive surprise on Azure could trigger a significant rally. Given the stock’s 8% decline over the past six months, the bar for a positive reaction seems relatively low if management can deliver a confident outlook.
We are watching Meta’s capital expenditure guidance very closely, as the market lost patience with its spending plans at the end of last year. With the stock’s forward P/E ratio having fallen to 19, below the S&P 500 average, there is room for an upward re-rating if the company can show a clear path to monetizing its AI models. Any sign of continued undisciplined spending without clear returns, however, could be heavily penalized.
Tesla’s earnings are less about the reported numbers, which are expected to be weak following a 16% drop in deliveries last quarter. The stock’s reaction will instead hinge on updates regarding full self-driving technology and the Optimus robot. With competitors like BYD reporting record sales in late 2025, traders will punish any perceived lack of progress on Musk’s future-focused promises.
Apple is expected to report massive revenues, but the key for traders will be the company’s forward guidance on profit margins. Memory chip prices have surged over 30% since the middle of last year, creating a significant headwind for 2026. Coupled with recent data showing a drop in iPhone sales in China, any cautious commentary could easily overshadow strong fourth-quarter results.
