Magnificent 7 ETFs Surge After Eventful Week of Earnings

An eventful week for megacap stocks ended on a high note.  

Four of the seven Magnificent Seven stocks announced earnings this week, and investors reacted positively to three of the reports. 

Tesla shares shot up 18% on the two days following its earnings call after the world’s largest electric vehicle maker painted an exciting, futuristic vision in which the company was a leader in autonomous cars and robots. 

The Direxion Daily TSLA Bull 2X Shares (TSLL) jumped 36% over two days, pushing its assets under management to nearly $850 million. 

The Consumer Discretionary Select Sector SPDR Fund (XLY), which has a 13% weighting in Tesla stock, jumped almost 4% this week, beating the 2.8% gain for the SPDR S&P 500 ETF Trust (SPY). 

Meta Disappoints  

The one big road bump for the Mag 7 came on Thursday following the release of Meta’s earnings report. 

Despite beating analyst estimates on the top and bottom line, the social media giant unveiled guidance for the second quarter that was underwhelming.  

The firm also announced plans to accelerate its investments in artificial intelligence, which prompted some investors to worry about profit margins. 

Meta tumbled almost 11% on Thursday, dragging the GraniteShares 2x Long META Daily ETF (FBL) lower by 22%. 

The Communication Services Select Sector SPDR Fund (XLC), which has a 22% weighting in the stock, sharply lagged the broader market this week with a fractional gain. 

Alphabet’s First Dividend  

But things could have been worse for the ETF were it not for a blowout earnings report from Alphabet later in the week. 

The search giant reported earnings and revenues that surpassed analyst estimates, neutralizing worries that its core business would struggle due to competition from chatbots like ChatGPT.  

The company also announced its intention to pay a dividend for the first time and said that it would be able to balance growth and investments in AI while expanding its profit margins.  

Investors loved the news, sending shares of Alphabet up by 12% midday Friday. The T-Rex 2X Long Alphabet Daily Target ETF (GOOX) soared 24%. 

Alphabet’s surge also boosted XLC, which has around a quarter of its portfolio allocated to the stock. The ETF gained 2.3% on Friday, clawing back some of its Meta-fueled losses from the previous day.  

AI Benefits Microsoft  

The largest of the Mag 7, Microsoft, also supported markets on Friday.  

The company’s revenues and profits for Q1 sailed past analyst estimates, but investors were particularly excited to hear that A.I. was already having a material impact on Microsoft’s business. 

Year-over-year sales growth in the company’s key Azure cloud business accelerated from 28% in Q4 to 31% in Q1, with 7 percentage points of that growth coming from AI services. 

Investors sent shares of Microsoft up by 3% midday on Friday, helping to lift the Technology Select Sector SPDR Fund (XLK)—which has a 23% allocation to the stock—up by 1.5%.