MW The market has cooled on tech. These are the trades to make now, says this strategist.

By Jamie Chisholm

Use options to play Meta, Microsoft and Apple says Evercore ISI

Microsoft will help launch the Big Tech earnings season on Wednesday

The ongoing fourth-quarter corporate earnings season has gotten a mixed reception. By Friday, 75% of the S&P 500 companies that had reported delivered a positive earnings-per-share surprise, which is below the five-year average of 78%, according to FactSet.

This may partly explain - along with geopolitical angst - why the S&P 500 SPX has been struggling to burst above the 7,000 level.

And now come Big Tech's results. Microsoft $(MSFT)$, Meta $(META)$ and Tesla $(TSLA)$ on Wednesday, followed by Apple $(AAPL)$ on Thursday, account for 16.5% of the S&P 500's market capitalization. More tech stars follow in coming weeks, culminating with Nvidia (NVDA) on Feb. 25.

The good news for bulls is that the market is decidedly cautious headed into Big Tech earnings, according to Julian Emanuel, strategist at Evercore ISI.

"Tech enters [fourth quarter of 2025] earnings season with among the most downbeat sentiment of the AI Bull market," Emanuel said in a note published Sunday.

And this means the set-up is much more favorable, he reckons. Emanuel recalls that, approaching the previous earnings season, investors were in a much more upbeat mood, which, for example, led to Oracle's shares $(ORCL)$ diving nearly 11% following its results.

So, just how wary is the market? Well, Emanuel notes that the information-technology sector is trading at its lowest next-12-month valuation premium to the S&P 500 in the postpandemic environment.

Source: Evercore ISI

"Drilling down even further, [the Magnificent Seven's price-to-earnings ratio] is in-line with its postpandemic average, while the 'other 493' stocks in the S&P 500 trade near their all-time high valuations," he says.

The main source of this tech-sector angst is software, where investors are concerned that AI may substitute many services, according to Emanuel. Software is currently seeing its worst underperformance in many years. It "feels so bad that a favorable risk/reward zone has emerged," he adds.

Source: Evercore ISI

Emanuel accepts there are many reasons for caution in the AI theme, including extended valuations and disappointing rates of AI adoption. In addition, leverage and circular financing have increased concerns that the AI capex build-out contains systemic risks.

But he says: "Similar to the progression of the late 1990s 'Internet Revolution' bull market that ended in the 2000-02 bust, there might come a day where these concerns are salient, but not only is that day not now, in our view, price has over discounted these concerns."

Consequently, Evercore is a buyer of the hyperscalers, of which Amazon.com (AMZN) and Alphabet $(GOOGL)$ report earnings next week, and of those tech stocks with notably high short interest relative to their two-year range. These include Qualcomm $(AVGO)$, Skyworks Solutions $(SWKS)$ and Fortinet $(FTNT)$.

For Microsoft, Meta and Apple, Emanuel suggests using options and undertaking a strategy called a bullish risk reversal. This entails selling a downside put option and buying an upside call option. A put/call option gives the buyer the right to sell/buy the stock at a particular price within a certain time. This risk-reversal strategy is used when an investor is bullish and wants to reduce the cost of a long position.

Evercore gives the specifics of each trade: For Microsoft, buy the April $515 call and sell the $435 put. For Meta, buy the April $765 call and sell the $590 put, and for Apple buy the April $265 call and sell the $235 put.

The markets

U.S. stock-index futures (ES00) (YM00) (NQ00) are slightly lower as benchmark Treasury yields BX:TMUBMUSD10Y dip. The dollar index DXY is falling, while oil prices (CL.1) slip. Gold futures (GC00) rose above $5,000 an ounce for the first time, and silver (SI00) hit a record near $1,100.

   Key asset performance                                                Last       5d      1m      YTD     1y 
   S&P 500                                                              6915.61    -0.35%  -0.21%  1.02%   13.35% 
   Nasdaq Composite                                                     23,501.24  -0.06%  -0.39%  1.12%   17.78% 
   10-year Treasury                                                     4.213      -1.40   10.20   4.10    -32.80 
   Gold                                                                 5091.8     10.66%  17.05%  17.53%  85.62% 
   Oil                                                                  61.2       3.34%   5.83%   6.60%   -16.28% 
   Data: MarketWatch. Treasury yields change expressed in basis points 

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The buzz

U.S. durable-goods orders for November jumped 5.3%, above forecasts of a 3.1% increase.

It's potentially a big week for monetary policy, with the Federal Reserve's interest-rate decision on Wednesday and the possible announcement of President Donald Trump's pick for Fed chair.

The Japanese yen (USDJPY) strengthened to its best level versus the U.S. dollar in more than two months amid concerns the Japanese and U.S. authorities may intervene to support the Asian currency.

CoreWeave shares (CRWV) are jumping after Nvidia invested $2 billion into the AI server company.

Shares of USA Rare Earth (USAR) are jumping after reports that the U.S. government will inject $1.6 billion into the Oklahoma-based miner.

The Treasury will auction $69 billion of 2-year notes, with the result announced at 1 p.m.

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The chart

Source: Tallbacken Capital Advisors

What happens in Tokyo does not stay in Tokyo. Michael Purves at Tallbacken Capital Advisors provides the chart, which he says shows one of the most abrupt spikes in Treasury-Japanese government bond correlations on record. "The culprit was not U.S. economic news or Fed messaging, but rather Japanese yields. Fiscal populism on top of already very high debt/GDP issues lifted back-end JGB yields abruptly," Purves says. "Subsequently, both Japanese and U.S. yields came back in as markets considered JGB action over done and the potential for some sort of intervention."

Top tickers

Here were the most active stock-market ticker symbols on MarketWatch as of 6 a.m. Eastern.

   Ticker  Security name 
   NVDA    Nvidia 
   TSLA    Tesla 
   GME     GameStop 
   INTC    Intel 
   TSM     Taiwan Semiconductor Manufacturing 
   AMD     Advanced Micro Devices 
   MU      Micron Technology 
   BNAI    Brand Engagement Network 
   PLTR    Palantir Technologies 
   USAR    USA Rare Earth 

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-Jamie Chisholm

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January 26, 2026 08:37 ET (13:37 GMT)

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