Much of what you hear on financial television is thinly disguised advertising. When a corporate executive or portfolio manager is flapping their gums on the tube, they’re essentially pitching their company or fund.

For example, I’m not the only one who’s leery of CNBC’s “Mad Money” picks. Tuttle Capital Management offers the Inverse Cramer ETF (SJIM), which seeks to provide investment results that are approximately the opposite of the results of the investments recommended by TV personality Jim Cramer. With an inception date of March 1, 2023, SJIM’s three-month trailing return is 11.7%.

Looking to separate hype from reality? Focus on fundamentals, such as quarterly operating results. The numbers provide clarity. They cut through the BS.

Big Tech’s quarterly earnings reports currently occupy center stage. These results, not softball interviews with the likes of Elon Musk or Cathie Wood, will greatly influence broader stock market performance in the coming months.

The technology sector shoulders the largest weighting within the S&P 500, with mega-cap household names delivering a disproportionate amount of the impetus for market gains so far this year.

The tech-heavy NASDAQ is up 23% year-to-date versus 9% for the S&P 500. Accordingly, quarterly results and guidance from the Silicon Valley stalwarts dominate the earnings season narrative, with implications for the broader stock market.

For Q3 2023, the blended year-over-year earnings decline for the S&P 500 is -0.4%, according to research firm FactSet. “Blended” combines actual with projected results.

For Q4, analysts are projecting earnings growth of 6.7%. For calendar year (CY) 2023, analysts predict earnings growth of 0.7%. For CY 2024, growth of 12.2% is expected.

Double-digit earnings growth next year may be an elusive goal for the S&P 500, as higher interest rates weigh on economic growth.

However, in recent quarters, companies have shown a demonstrable ability to boost profit margins, largely through cost-cutting and greater efficiencies. This dynamic will come in handy next year, as the lagging effects of monetary tightening kick in.

The blended net profit margin for the S&P 500 for Q3 2023 is 11.6%. The consensus projects that profit margins will be higher in the first half of 2024. As of this week, the estimated net profit margins for Q4 2023, Q1 2024, and Q2 2024 are 11.5%, 12.0%, and 12.3%, respectively.

Read This Story: Q3 Earnings: Strong Medicine for Frayed Nerves

Earlier this week, tech heavyweights Alphabet (NSDQ: GOOGL), International Business Machines (NYSE: IBM), Meta Platforms (NSDQ: META), Microsoft (NSDQ: MSFT), and ServiceNow (NYSE: NOW) all posted robust results, in most cases beating expectations.

The following chart depicts the extent of Meta’s impressive rebound:

Fueling the tech sector’s prosperity is continual innovation, not just in work-at-home digital capabilities but also in renewable energy, health services, virtual/augmented reality, robotics, artificial intelligence, autonomous vehicles, orbital satellites, fifth generation (5G) wireless, and the Internet of Things.

The big buzz, of course, is artificial intelligence (AI). The mania we saw earlier this year over AI has (predictably) subsided somewhat, but it remains in the driver’s seat for the tech sector.

Analysts are predicting year-over-year earnings growth rates in the tech sector of 4.8%, 13.4%, 17.4%, and 13.7% for Q3 2023 through Q2 2024 (see chart).

Complicating the fight against inflation is the latest data showing torrid U.S. economic growth. In the sometimes “bizzarro” world of Wall Street, such good news can be interpreted as terrible news.

The U.S. Bureau of Economic Analysis reported Thursday that the country’s gross domestic product (GDP) growth over the three months ending September more than doubled growth in the previous quarter, defying fears about a recession but possibly giving the Federal Reserve justification for hiking interest rates again this year. The Fed meets next week and investors nervously await its policy decision.

U.S. GDP grew at a 4.9% annualized rate in Q3, compared to a 2.1% annualized rate over the previous quarter. The biggest force behind the increase was consumer spending. The tug-of-war between consumer spending and the Fed’s anti-inflation campaign continues.

Good, but not good enough…

The main U.S. stock market indices closed mostly lower Thursday, as follows:

• DJIA: -0.76%
• S&P 500: -1.18%
• NASDAQ: -1.76%
• Russell 2000: +0.34%

After the closing bell Thursday, ecommerce giant Amazon (NSDQ: AMZN) reported Q3 results that beat expectations on the top and bottom lines.

AMZN’s EPS for Q3 came in at 94 cents per share vs. 58 cents per share expected. Revenue was $143.1 billion vs. $141.4 billion expected.

The company’s Amazon Web Services segment posted $23.1 billion vs. $23.2 billion in expected revenue. Advertising revenue was $12.1 billion vs. $11.6 billion expected.

Chipmaker Intel (NSDQ: INTC) also reported after the close. Intel posted Q3 EPS of $0.41, $0.19 better than the analyst estimate of $0.22. Revenue for the quarter came in at $14.2 billion versus the consensus estimate of $13.5 billion.

Intel also issued strong forward guidance. The company sees Q4 2023 EPS of $0.44, versus the consensus of $0.31. Intel sees Q4 2023 revenue of $14.6 billion to $15.6 billion, versus the consensus of $14.3 billion.

Those are solid numbers for Amazon and Intel, and they especially mark a turnaround for Intel. However, a headwind for the entire tech sector is elevate bond yields. On Thursday, the 10-year U.S. Treasury yield eased a bit to hover at 4.84%, but that level still represents a 16-year high. The CBOE Volatility Index (VIX) jumped about 3.00% and hovers at 20.80, a bearish reading that indicates more market stress ahead.

Aside from persistent interest rate fears, also weighing on stocks are overly optimistic expectations for the tech sector. Mega-cap tech earnings have been pretty darn good so far, but sometimes on Wall Street, good just isn’t good enough.

Some tech companies, despite soundly beating projections on both the top and bottom lines, have seen their shares slump after reporting operating results, because management’s forward guidance was less than stellar.

Bellwether tech stocks are posting robust profits, but the NASDAQ and other main indices are still having a lousy week.

No one can say when the broad market slump will end. But in the meantime, are you looking for the “Next Big Thing” in the technology sector? Not just hype, but the real deal? My colleague, Dr. Joe Duarte, can steer you in the right direction.

As chief investment strategist of Profit Catalyst Alert, Dr. Duarte has just pinpointed a tiny, unknown company that has developed a revolutionary “black box” technology.

You need to get in on the ground floor of this game-changing opportunity before the investment herd finds out and sends the share price soaring. Click here for details.

John Persinos is the editorial director of Investing Daily.

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