Make way for tech earnings: Alphabet and Microsoft report after the close

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Wall Street ended sharply higher on Monday after Elon Musk's deal to buy Twitter recharged traders' risk appetite and gave a much-needed boost to the tech wreck. The Federal Reserve's plans to quickly raise interest rates has seen the sector lose ground since the beginning of the year, while other macro factors like surging inflation and the war in Ukraine have weighed on the overall sentiment. The tech giants have also had to navigate evolving consumer spending, which was a boon during the year ago pandemic-driven quarter, but has since shifted toward in-person goods and services.

Bigger picture: The newly found FAANG family, now called MAMAA by Mad Money's Jim Cramer (he coined the first phrase in 2013), includes Meta, Apple, Microsoft, Amazon, and Google parent Alphabet. The quintet will report earnings over the next several sessions, with many eager to see how the quarterly results will impact market direction given their heavy weight in the S&P 500. Combined revenue of the group is expected to have surpassed $340B in Q1 of 2022, up by 7% compared with the same period last year.

The numbers will turn into headline news after Monday's closing bell as Alphabet and Microsoft kick off the festivities. Online advertisers are expected to have spent heavily on YouTube and other Google services, though commissions on in-app payments will be watched closely, as well as comments on antitrust action that allege search dominance. Bumper results are also expected at Microsoft, which may divulge more details surrounding its $69B deal to buy videogame maker Activision Blizzard as one of the paths into the metaverse.

Commentary: "A third of the S&P is reporting [earnings] this week, and you're probably going to see much of the same: lots of top and bottom line beats. Companies are going to talk about margin pressures and passing on price increases to the consumer, but they're still going to highlight there’s still overall optimism about the economy," said Edward Moya, senior market analyst at Oanda. "Technology companies have a free pass right now, because the sector's down," added Brian Belski, chief investment strategist at BMO Capital Markets. "It doesn’t mean that the earnings are going to suck. It just means that this is their opportunity to really set the bar lower and under promise and over deliver."