Earnings May Not Support Further Mega-Cap Tech Stock Rally

This month’s rally in the mega-cap technology stocks of Apple (APPL), Alphabet (GOOGL), and Microsoft (MSFT) has been fueled by their safe haven status. Concern about contagion from the banking turmoil has pushed investors toward the cash-rich balance sheets and steady revenue streams of mega-cap technology stocks.  Three other mega-cap technology stocks, including Nvidia (NVDA), Meta Platforms (META), and Tesla (TSLA), have also benefited from the banking sector woes. 

Although mega-cap technology stocks have rallied this month on their safe haven demand, further upside in their share prices may be limited.  Valuations of the mega-cap tech stocks are elevated.  Also, the earnings outlooks for the companies have been clouded by economic concerns.  Finally, falling bond yields, a key contributor to the recent rally in technology stocks, could prove short-lived if the Federal Reserve keeps raising interest rates.