Welcome to my latest video presentation for Mind Over Markets. The article below is a condensed transcript; my video contains additional details and several charts.

In January, we witnessed a sharp rebound in the stock market, with Big Tech leading the way. The Federal Reserve’s recent dovish intimations have fueled the surge, especially among interest rate sensitive growth stocks.

Then, after the closing bell Thursday, a trio of bellwether tech mega-caps threw cold water on investor enthusiasm. Apple (NSDQ: AAPL), Google parent Alphabet (NSDQ: GOOGL), and Amazon (NSDQ: AMZN) all reported disappointing operating results for the end-of-year quarter that renewed worries about global economic demand and the deleterious effects of higher interest rates.

Wall Street is taking a deep breath and wondering whether it got ahead of itself.

Apple, the world’s largest publicly traded company, missed expectations on the top and bottom lines, hurt by lower iPhone sales and production disruptions in COVID-battered China.

E-commerce giant Amazon beat on revenue but missed on earnings and provided anemic guidance. The miss on Amazon Web Services (AWS) sales was a particularly hard blow, due to the strategic importance of cloud services for the company.

Alphabet missed on earnings and revenue, in large part due to a year-over-year decline of 8% in YouTube advertising revenue.

Big Tech surged Thursday following a strong quarterly report from Facebook-owner Meta Platforms (NSDQ: META). Two weeks ago, Microsoft (NSDQ: MSFT) beat on earnings and provided rosy guidance. But now the tech sector euphoria is wearing off, at least temporarily.

That said, I suggest that you keep your eye on the long haul. Over the next 12 months, analysts project an increase for the S&P 500 of at least 11%.

Nearly 50% of S&P 500 companies have reported earnings for this earnings season, and results have been mixed but better than expected. Among the companies that have reported, 70% have delivered positive earnings surprises, in-line with long-term averages. As of this video presentation, consensus expectations for fourth quarter earnings growth have improved to 0.5%, well above the previous expectation of -4.0% growth heading into the quarter.

To be sure, we’ve seen a lot of layoffs so far this year in the tech sector. Those job losses cause human pain, but they’re also good for the top and bottom lines. Sometimes, capitalism isn’t pretty. Tech companies are coming into 2023 in leaner shape.

Big Tech hit a speed bump with Thursday’s operating results, but demand should pick up in 2023 as inflation wanes and the Fed gets less hawkish.

Powell strengthens the bull case…

Fed Chair Jerome Powell said at his press conference Wednesday that the “disinflationary process has started.” When the ordinarily dour Powell uttered those encouraging words in the late afternoon, U.S. stocks immediately leapt higher in real time, in Pavlovian response.

Powell’s statement provided support for the bull case, as did the Fed’s rate hike of 0.25%, a widely expected step down from its previous hike of 0.50%. The federal funds rate currently hovers at 4.33%; the target rate is between 4.50% and 4.75%.

The betting now on Wall Street is that the Fed will hike rates one more time in March and then pause.

According to a new International Data Corporation forecast released in January, global revenue for enterprise applications will grow from $279.6 billion in 2022 to $385.2 billion in 2026, for a five-year compound annual growth rate of 8.0%. Nearly all this growth will derive from investments in public cloud software.

The U.S. economy has been cooling, just as the Fed wants, but it’s nonetheless forecast to grow in 2023 by 1.4%, which isn’t exactly gangbusters but neither does it constitute a recession.

What’s more, the Bureau of Labor Statistics reported Friday that the U.S. added 517,000 jobs last month, a stunning rate of labor market growth. The unemployment rate dipped from 3.5% to a new longtime low of 3.4%, despite sweeping tech layoffs. Wall Street’s hopes for a “soft landing” seem increasingly possible.

Importantly, especially for Big Tech, China’s economy is forecast to grow by about 5.2% this year. Global growth is projected to reach 2.9% (see my video for charts).

It’s also significant that the S&P 500 has breached its 200-day moving average. As we pass over this speed bump, stay the course.

Editor’s Note: In a new report, my colleague Dr. Joe Duarte pinpoints a groundbreaking tech disruption worth $75 trillion…and it all starts with one “odd” $3 stock.

Dr. Duarte is the chief investment strategist of our premium trading services, Profit Catalyst Alert and Weekly Cash Machine. He currently recommends an investment opportunity in the tech sector that’s poised for market-crushing gains. Learn more by clicking here.

John Persinos is the editorial director of Investing Daily.

Subscribe to John’s video channel: