A big tech earnings miss would be a big problem for broader markets, says Solus' Dan Greenhaus

Core Viewpoint - The upcoming week is critical for the market, with significant focus on mega-cap earnings and the Federal Reserve's decisions, which could impact market sentiment and performance. Group 1: Market Sentiment and Expectations - The market is currently experiencing a resilient rally, driven by positive trade headlines and expectations for favorable results from mega-cap companies [1] - Expectations for the MAG 7 companies indicate an average earnings rise of 14.5%, which is relatively low compared to the 35% average seen over the past couple of years [5] - Nearly 90% of companies that have reported earnings thus far have exceeded expectations, although this has not led to significant market rewards [6] Group 2: Importance of Mega-Cap Companies - Mega-cap companies, excluding Tesla but including Broadcom, represent about one-third of the S&P 500's market capitalization, with the total including other significant players reaching approximately 43-44% [3][4] - If there are any disappointments in earnings from these mega-cap companies, it could pose a substantial problem for the overall market [10] Group 3: Capital Expenditure and Growth Rates - Capital expenditure (capex) spending is projected to reach $105 billion across the mega-cap group, with potential upside for companies like Apple and Amazon [6] - Growth rates for mega-cap stocks have been declining, which aligns with earlier predictions that growth would slow for these companies while accelerating for others [8] Group 4: Broader Market Trends - Financials have shown strong earnings per share (EPS) growth of over 20%, surpassing the expected 13% [11] - The market has seen significant returns from non-profitable names and heavily shorted stocks, indicating a shift towards optimism regarding future earnings growth [11] Group 5: Trade Relations and Tariffs - The market is less concerned with specific trade details between the U.S. and China, focusing instead on avoiding worst-case scenarios related to tariffs [12][14] - There is a general acceptance of rising tariffs and their impact on prices, with the market currently at record highs suggesting a level of confidence in the trend not worsening [15]