This year’s rally of more than +20% in with the Nasdaq 100 Stock Index ($IUXX) (QQQ) will be tested by results from the Q1 earnings season that begins later this week. Technology stocks rallied sharply in Q1 as investors rotated out of financial stocks amid the turmoil in the banking sector. However, Q1 quarterly profits for the S&P 500 information technology sector are expected to fall -14.9%, the biggest drop for the sector since at least 2006.
Some gains in technology stocks this year have been driven by expectations that a slowdown in the economy will force the Federal Reserve to pause its rake-hike campaign. BlackRock said, “The tech performance is being driven by expectations the Fed will start cutting rates as a recession becomes evident, and not necessarily by company fundamentals.” BlackRock warns that “the impact of inflation and higher costs still has room to hit profit margins, and that will come through this season.”
