Technology sector ETFs are in for a big week ahead as tech stock “Cadillacs” are up to bat.
While investors were initially put off by the lackluster quarterly report out of Netflix (NasdaqGS: NFLX) on Tuesday, the rest of the FAANG group could help erase the blemish. Specifically, traders were looking to the rest of the FAANGs, including Facebook (NasdaqGS: FB), Apple (NasdaqGS: AAPL), Amazon (NasdaqGS: AMZN) and Google’s parent company Alphabet (NasdaqGS: GOOGL), along with Microsoft (NasdaqGS: MSFT).
Consequently, ETF investors will be focusing on big tech funds, like the Technology Select Sector SPDR Fund (XLK ), which includes AAPL 20.1% and MSFT 19.2%, along with the Communication Services Select Sector SPDR Fund (XLC), which has FB 19.7%, Alphabet Class A 11.8% and Alphabet Class C 11.8%.
Daniel Morgan, portfolio manager at Synovus Trust, called the group as the “Cadillacs” of the technology sector and argued they should continue to bolster the S&P 500, Reuters reports.
“They’re still going to be the show-business highlight stocks that everybody focuses on, and I expect them to do well,” Morgan told Reuters.
Analysts anticipate these tech names to report faster revenue growth than the broader S&P 500 for the last quarter and even faster earnings growth in some.
However, given the recent price outperformance in the technology sector, market observers argue that these tech giants will need to provide outsized results in quarterly numbers and positive forecasts to justify continued outperformance.
“We do believe there could be downside for the stocks if they do not over-deliver on earnings and narrative,” John Augustine, chief investment officer at Huntington National Bank, told Reuters. “To push the stocks higher from here, both earnings and guidance need to beat expectations.”
Apple will report on January 28. Facebook and Microsoft will release results on January 29. On January 30, Amazon is up. lastly, Google’s parent Alphabet will announce results on February 3.
This article originally appeared on ETFTrends.com.