This Friday, major tech giants will release earnings reports in concentrated succession, coinciding with the FOMC meeting; a market storm is about to arrive.

Written by: Long Yue

Source: Wall Street Insights

The higher the market rises, the more dangerous it becomes—this is not the intuition of pessimists, but a warning from Bank of America's quantitative model.

The U.S. stock market is in a rare moment: the indices are reaching new highs, but volatility is also rising simultaneously. This combination of "price increases without decreasing volatility" is historically typical of the bubble phase.

This week, the market will face two major concentrated tests: the FOMC interest rate decision and the earnings reports of five companies from the "Tech Seven." The overlapping of these two events constitutes the most concentrated trading catalyst window in recent times.

"Upside Collapse": The Greater the Rise, the Higher the Risk

According to reports from the trading desk, the bank's derivatives strategy team (analysts including Nitin Saksena) has presented a striking judgment in their latest report:

The Nasdaq has risen for a record 13 consecutive trading days, achieving a volatility near 25%, a historical high—this surge in the S&P 500 is even comparable to the period during the COVID-19 pandemic, yet it has not experienced equivalent market pressure. This "upside collapse" dynamic is highly consistent with our forecast of a bubble market in 2026.

What is an "upside collapse"? Simply put, it's when prices rise rapidly while volatility increases—markets are in euphoria, but premiums are also rising concurrently. This usually signifies that market participants are not calm, and the divergence in perspectives is widening.

More notably, the AI sector warrants attention. The report indicates that the "bubble risk index" for AI-related assets like semiconductors has risen to its highest level since the launch of ChatGPT. During last week's market surge, stock volatility not only failed to recede but was also supported—this serves as further evidence of bubble dynamics.

What Will Powell Say This Time?

On April 29 (Wednesday), the FOMC will announce its interest rate decision. Analysts wrote:

The Federal Reserve will likely remain steadfast in its position during the April meeting. The inflationary risks stemming from the Iran war have not yet dissipated, and labor market data has also shown improvement. Powell is likely to release hawkish signals during the press conference.

Three key points to watch: First, whether he maintains an open attitude toward further rate hikes; second, how he assesses the impact of the war on the economy; third, whether he will emphasize the recent rebound in the labor market.

From a data perspective, analysts forecast the annualized GDP growth rate to be 2.4% for Q1 to be announced on April 30 (the market consensus is 1.6%), with core PCE expected to be 3.1% year-over-year. Inflation remains high, which is the fundamental reason for Powell's difficulty in shifting to a dovish stance.

Earnings Reports from Five Major Tech Giants: All Expectations Exceed Consensus

This week, the market's focus is on the concentrated earnings reports from five members of the "Tech Seven." Analysts' forecasts for all five are above market consensus.

Meta (April 29) Analyst Justin Post expects Q1 revenue / EPS to be $56 billion / $7.44, higher than the market consensus of $55.4 billion / $6.64. The drivers are AI empowering the core advertising business and continued cost control. The biggest recent risk is the impact of macroeconomic uncertainty on Q2 revenue guidance, or potential upward revisions to AI infrastructure capital expenditures.

Amazon (April 29) Justin Post expects Q1 revenue / EBIT to be $178.4 billion / $21.4 billion, higher than the market consensus of $177.1 billion / $20.7 billion. AWS growth forecasts have been raised to 28% year-over-year, above the market consensus of 25%, partly driven by revenue related to Anthropic.

Alphabet (April 29) Justin Post expects Q1 revenue / EPS to be $92 billion / $2.69, slightly above the market consensus of $91.7 billion / $2.66. The integration of the Gemini model is expected to drive search and cloud business results above expectations, with search revenue growth projected to reach 18%.

Microsoft (April 29) Analyst Tal Liani expects EPS to be $4.05, slightly above the market consensus of $4.04. The core highlights are Azure revenue growth (as AI computing power comes online), Copilot paid seat expansion, and the stability of non-AI businesses.

Apple (April 30) Analyst Wamsi Mohan expects Q2 revenue / EPS to be $113 billion / $2.00, higher than the market consensus of $109 billion / $1.93, mainly supported by strong iPhone sales.

This Week's Market Calendar: Highest Volatility on Thursday

According to SPX implied volatility data, the market's expected volatility for each trading day this week is as follows:

Thursday (April 30) will be the day with the highest volatility expectation this week—PCE inflation data and the earnings reports from several tech giants will be released on the same day, providing an abundance of information.

Facing the market environment of "upside collapse," the analyst team has provided specific hedging ideas:

QQQ call spread options and VIX call spread options, which benefit from the currently attractive skewed entry points, can hedge against recent right-tail and left-tail risks.