The stock market rally continued to show strength this week. This performance comes as many tech companies like apple and amazon are reporting better-than-expected earnings and issuing positive full-year guidance. Tech led the market higher, with the sector gaining more than 10% from its June lows. 
Michele Schneider, Partner and Director of Trading Research and Education for Marketgauge, breaks down earnings from the top companies and how inflation is impacting the technology sector. 

Opening Bell

Tech Rally After Upbeat Alphabet, Microsoft Quarterly Results

here to discuss is Michelle Schneider partner and director for trading research and education for market gauge. Thank you so much for being here. Michelle, I'm gonna ask, you know, Apple earnings beat estimates due to strong iphone sales and guidance. What is your take on Apple's results? Mm Well I love the expression that I've been seeing, which is better than feared because I think that fear has been something that has been a big component of the overall macro in the market. And Apple came in and proved that it was certainly better in terms of they weren't as concerned about supply uh, and concerned about labor. They're actually hiring as opposed to not hiring or at least that's what they're claiming. But the most important thing to realize on those iphone sales is that a big chunk of it was in India and India is an emerging market right now. That makes it kind of interesting that based on the U. S. That's really where they perform well. So clearly we love to see the tech in the growth area continue to go up. But however we do have some headwinds even in Apple stock. I mean we we've we've gotten through a big point here around 158, I like to put numbers on things because I'm a tech person, right? You know, technical analysis. So if we can hold up over 158, we clear a lot of the bottoming formation that we've had over the course of the last couple of months. But if we can't get through, say 1 70 or if we break down under 1 58 it could be that the optimism that we're seeing from the tech space is going to be short lived as we go forward with some real issues that we still have to face. Hmm. And those issues concern a lot of people. So how can Apple really signal strength or weakness for that matter? And technology and consumer demand? Well basically the consumer demand is the key here. And the whole consumer market, the whole consumer discretionary market is very mixed up on one level you have a company, let's say like Roco, which is, is down tremendously because of their ad sales and their consumer demand has dropped where Apple is just the opposite. So it's really gonna be a matter of, I think really gets back down to the Fed and what the interest rate policy is going to be going forward because if they continue to pinch the consumer because of inflation and then you continue to raise rates to beat that inflation. And let's face it, inflation is a real factor here as we're seeing. Um, then I think it will actually affect the big tech, But more importantly, one has to ask is tech enough to carry the entire stock market and the entire US economy. And I think that's really the question here that we are somewhat skeptical about a lot of people are pointing to no on that. But you mentioned inflation. So despite inflation and the net loss of $2 billion, Amazon's results were better than actual analysts expected. So sales from the e commerce giant increased 7% to 121.2 billion in the second quarter. Do you see amazon being able to navigate the headwinds facing the retail industry to a point? Yes, it will outperform because it is amazon, I mean here's a perfect example. If you just take it. I was going to send something to my mother for her birthday using the traditional overnight delivery services and the charge was so amazing that I, I said no and I went to amazon when I'm a prime member and I was able to send the same stuff for a lot cheaper without the delivery costs and that's where amazon has a competitive edge and always will. So it's really gonna be a matter of, not necessarily can continue to grow from here because yes, cloud computing is a big area, but can the consumer continue to buy And it gets back to what we just originally said is are they going to be pinched by further hikes in rates, which I think is bound to happen as the Federal Reserve is going to realize that oil by the way at $110 a barrel today hasn't exactly gone down. Food prices are coming back up. Our crop conditions are not great. There are so many different signs, we have geopolitical stress potentially happening now china Taiwan added to the list of things. So all of that is really down to the consumer. So if you want to really look at the consumer base without looking at a specific company like amazon or Apple, really look at the sector E T F X R T. And it is underperforming all the other sectors right now that has to come into the party. If that comes into the party of XR T as the E T. F can start to move up from here, then I think we're saying you know what the consumers are more optimistic than we think. However if that turns down eventually that will affect the stock, all of the stocks and with amazon really now you want to see it hold around that 1 28 level is really gonna be key. You have some good points there by amazon, my wife loves it. So I'm glad we're saving some money at least in the shipping costs. But you know what? We saw some disappointing earnings this week from meta Microsoft intel and Qualcomm. So what do you think that these results from these companies signal about the digital ad business and consumers man as well? Well yeah that's I think really more of what we're experiencing here. I mean if you take a look at stock like meta obviously ad sales there have gone down. Um and and also they're trying to do a big shift anyway more into virtual reality and the metaverse and that could take time. I wouldn't say meta is done completely ever and ever and ever again. But certainly there's been a lot of bad press just with Zuckerberg alone this year. So I'm not surprised as far as again Rocca, ooh, I mean there's just so much competition there. Netflix, which of course was left for dead when it reported did did didn't do so great in terms of the earnings, but again, it was it better than feared and actually now it's been trying to find its base here. So um you know, I mean you gotta look at disruptive tech too. I mean Teladoc got killed and if you look at the Cathie wood's ark which is all based on the idea that we're going into deflation and that disruptive tech is going to be the kingpin. That certainly hasn't happened yet. So right now we're still in this traditional people are going like I said, you gotta look at over seas, sails and apple and with amazon right now it's still the cheapest place to buy goods and that may stay the case until people get to the point where like I said, interest rates go up, more people are gonna go, you know what, I'm only gonna buy what I need still would be better for amazon relative to everything else, but I still think we can see the whole market come down with that. All right, well we only have about a minute left. So I wanna get to this last question because there's talks of a recession continue. What should investors know about this time of high inflation? A healthy labor market and slowing growth as well? Well, I actually have been using the word stagflation Shannon because I don't think that recession really describes what we're having here at all. I mean we're having a stagnating economy. So the fact that the G. D. P. Went down is not totally surprising to me, but at the same time are we going into a deep recession? Well, certainly that could happen right if the Fed continues to or not even continues if it starts to get more aggressive. But right now this is stagflation. So you have to say what does that mean? And that means you don't really want to invest so much in growth. We have this nice little pop here. I would be saying if you were along some of these growth tech companies probably a good time to take some profit and that's where the switch can still go back to real goods, things that people need or you know, real assets over paper. And that's kind of what we still think is gonna happen as we get into the end of 2022 into 2023 I don't see inflation is over. And as I said, look at the oil, if it gets through 100 $10 a barrel, it could go up to 100 and 30 and more quite easily because of all the issues that we have with supply and geopolitics. So that's kind of where we're at right now. Not so focused on recession, but more like flat line, not necessarily what we wanted to hear, but she's just a messenger. So, All right, Michelle Snyder for market gauge. Thank you so much for your insight.