U.S. Tech Giants Face Earnings Test Amid Tariff Uncertainty and Market Volatility

NEW YORK, April 18 (Reuters) - The upcoming week promises a busy schedule of U.S. company earnings, testing a stock market already reeling from the uncertainties introduced by the latest U.S. trade policy changes. Investors remain on high alert following President Donald Trump’s imposition of tariffs on April 2, a move that has triggered market volatility reminiscent of the early stages of the COVID-19 pandemic five years ago. "The perspectives of CEOs have never been more critical," said JJ Kinahan, CEO of IG North America and president of online broker Tastytrade. Companies and investors are now navigating a tariff landscape that is likely to remain volatile as the Trump administration continues negotiations with other countries. Although some of the most severe tariffs on imports have been temporarily suspended, the U.S. remains embroiled in a trade conflict with China, the world's second-largest economy. One of the key companies to watch is Tesla, which is set to report its earnings on April 22. The electric vehicle maker, closely associated with billionaire Elon Musk, is a focal point due to Musk’s relationship with the Trump administration. Meanwhile, Alphabet will be under scrutiny for insights into advertising spending and capital expenditures related to artificial intelligence. A recent legal setback saw Google, Alphabet’s subsidiary, ruled to have illegally dominated two markets for online advertising technology, adding another layer of uncertainty to its earnings report. The performance of the Magnificent Seven megacap stocks has been particularly significant. These stocks, which had previously driven market gains, have seen sharp declines this year. Alphabet is down by about 20%, while Tesla has fallen by 40%. "If the Magnificent Seven can't continue to perform, it could signal broader market challenges," Kinahan noted. The market's overall performance and stability are closely tied to the fortunes of these companies. Earnings projections for U.S. companies have also been revised downward. According to LSEG IBES data, S&P 500 earnings are now expected to increase by 9.2% in 2025, a significant drop from the 14% growth forecast at the beginning of the year. Investors are preparing for further contractions as companies report their results and account for the financial impact of the new tariffs. Adding to the market anxiety, President Trump’s criticism of the Federal Reserve has put additional pressure on its policies. Trump recently declared that Fed Chair Jerome Powell’s removal "cannot come fast enough" and called for the central bank to cut interest rates. In response, Powell indicated that the Fed will await more economic data before making any changes to the interest rates. The market's volatility, as measured by the CBOE Volatility Index, is currently around 30, a level significantly higher than its long-term median of 17.6, according to LSEG Datastream. Ayako Yoshioka, senior investment strategist at Wealth Enhancement, emphasized that the index would need to drop to the mid-teens to suggest a subsiding of market tensions. "If it stays around 30, it doesn’t mean we’re out of the woods," Yoshioka warned. In summary, the coming week will be pivotal as investors and analysts closely monitor the earnings of major U.S. companies, particularly in the context of ongoing trade tensions and a volatile economic environment. The market's resilience will be tested, and the performance of the Magnificent Seven will be a key indicator of broader economic health.