Wall Street is heading into the busiest earnings week of the season, and JPMorgan said to expect higher-than-usual volatility in the wake of results.
Almost half of the Russell 1000, an index that tracks the largest US companies and encompasses roughly 93% of the American equity market, will report earnings this week. JPMorgan found that the options market is pricing in above-average volatility due to uncertainty and an embedded geopolitical risk premium, meaning investors could be in for a bumpy ride.
“Options are pricing above-average earnings volatility this quarter. Implied moves are elevated,” the bank wrote, noting that the analysis doesn’t signal the direction of the move, only the size.
Wall Street has its hopes pinned on a strong first-quarter earnings season, with JPMorgan and others saying that robust results will help offset the drag from the Iran war-driven oil price spike.
So far, earnings are off to a strong start. Roughly a third of S&P 500 companies have reported, beating estimates for the top and bottom lines on average at a higher rate than the quarter prior.
In the week ahead, five of the Magnificent Seven names—Alphabet, Apple, Microsoft, Amazon, and Meta— will report. Tesla already reported, while Nvidia’s results won’t come until May 20.
Wednesday, the busiest earnings day of the week, will see results from Amazon, Alphabet, Microsoft, and Meta.
Meta stock is expected to be the most volatile, with a move of over 7%. Amazon and Microsoft are expected to move nearly 6.5% and 6%, respectively. Google stock is expected to move roughly 4%.
Apple reports on Thursday and is expected to have the most muted stock move of 2.2%. It will be the iPhone maker’s first earnings release since announcing John Ternus as Tim Cook’s successor.
The most dramatic post-earnings move from the stocks analyzed is expected from Avis Budget, which is expected to gain or lose over 29% after reporting. The meme stock has made headlines recently for its dramatic rally and sudden collapse this week.
JPMorgan said it’s also eyeing potentially large swings in memory chip stocks like SanDisk and Seagate Technology following their recent rallies, which some see as poised for a reversal.
Internet stocks, such as Roblox, Reddit, and Etsy, as well as consumer product stocks, including Estee Lauder and Crocs, are also expected to see double-digit stock moves on earnings.