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(Bloomberg) -- Investors in the US technology behemoths that dominate the S&P 500 Index are breathing a sigh of relief as last week’s earnings reports from the group show their outlooks remain mostly strong in the face of President Donald Trump’s shifting trade policies.
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One after another, tech giants from Amazon.com Inc. to Microsoft Corp. unveiled forecasts that suggest demand remains largely intact for businesses including electronic devices, cloud computing services, software and digital advertising. While the reports were by no means perfect — Apple Inc. was a high-profile disappointment — they eased many of the worst-case fears that the firms would signal a tariff-induced profit slump was on the immediate horizon.
It was an encouraging stretch for investors seeking signs that the stock market’s rebound potentially has legs. The tech-heavy Nasdaq 100 Index took its two-week rally to 10% and is now almost 3% above where it closed on April 2, before Trump unleashed tariffs on virtually all of America’s largest trade partners. Microsoft led gains in the so-called Magnificent Seven megacaps, with its best week in more than two years.
“A lot of investors were braced to hear things that were very grim,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott. “Even numbers that were a little weak were far from the worst-case scenario. That’s allowing the market to take a glass-half-full view, even though the situation remains foggy, and the rebound could be jeopardized by any emerging signs of a slowdown.”
Of course, the threat of renewed volatility hangs over the tech giants as the trade war drags on. It will also take until the next earnings cycle to see how the sector actually performed once Trump’s levies took effect. Until the picture is clearer, Luschini said he’s avoiding big sector bets and holding defensive shares, along with tech stocks linked to long-term growth trends.
Big Tech companies have been at the center of the selloff in US stocks that’s shaved about 3% off of the S&P 500 this year as traders pocketed profits on the cohort and shifted into defensive assets. The worry is that tariffs will fan inflation and stifle economic growth. The market got some reassurance on Friday from a strong jobs report, as well as hints of possible trade talks between the US and China.