XLK - Credit Suisse wary on Big Tech earnings but Oppenheimer highlights charts

Credit Suisse says 2Q earnings season should be robust but noisy.

The equity strategy team is looking for +5.5% growth in S&P 500 ( SP500 ) ( NYSEARCA: SPY ) 2Q EPS, but said Monday with tough comps that number obfuscates underlying strength.

"While managements will continue to highlight cost pressures, results should top estimates by 4-6%, primarily on better margins," strategist Jonathan Golub wrote in a note.

But an area of weakness will be what Credit Suisse calls TECH+ .

TECH+ is an equal-weighted Russell 1000 ( IWB ) basket that includes traditional tech names found in SPDR Info Tech ( NYSEARCA: XLK ), but also Alphabet ( GOOG ) ( GOOGL ), Meta ( META ), Netflix ( NFLX ) and Amazon ( AMZN ), and not Tesla ( TSLA ).

"The largest 6 TECH+ companies (Apple ( AAPL ), Microsoft ( MSFT ), Alphabet ( GOOGL ), Amazon ( AMZN ), Nvidia ( NVDA ), Meta ( META )) are all projected to experience margin contraction," Golub said.

"EPS for FAANG (META, AAPL, AMZN, NFLX, GOOGL) is expected to fall -19.2%, TECH+ ex-FAANG +1.9%," he added. "Large expenditures at Amazon are a disproportionate drag on Discretionary ( XLY ). Ex-AMZN, EPS for the sector jumps to 13.1%."

But a few of those names have hit Oppenheimer's OPCO Trifecta.

An OPCO Trifecta stock is:

1. Rated Outperform on fundamentals
2. Screens "positively on our trend work"
3. Is supported by top-down portfolio tailwinds

"Our attempt is to maintain a dynamic list of our top ideas, deleting when necessary and adding/highlighting when tactical," technical analyst Ari Wald wrote in a note.

Those stocks highlighted are GOOG, just added to the list, AAPL, MSFT and AMZN.

BofA said last week conditions are setting up for a summer rally that could turn tech lemons into lemonade .

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