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Tech stocks bounce back, Adobe, Fedex to report earnings after market close

Yahoo Finance's Emily McCormick joins The First Trade with Alexis Christoforous to discuss Bank of America's September Fund Manager Survey, in addition to what to expect from Adobe and Fedex earnings after market close on Tuesday.

Video Transcript

ALEXIS CHRISTOFOROUS: All right, we're also keeping an eye on tech stocks, which are now the most crowded trade of all time, so says 80% of fund managers responding to Bank of America's global survey. Yahoo Finance's Emily McCormick is joining us now. And Emily, as I looked through the survey, also found these fund managers say they fear a tech bubble almost as much as they fear a second wave of COVID-19.

EMILY MCCORMICK: That's right, Alexis. So taking a look at the Bank of America September Fund Manager Survey, we had a record, 80% of those surveyed saying that long US tech stocks was the most crowded trade. So unsurprising, given the run up that we've seen in tech stocks over the past several months from those March 23 lows in the broader market. Really leading the way higher and starting to see some of that unwind over the past week now.

Now, you also mentioned fears of a tech bubble being the number two tail risk investors cited after a COVID-19 second wave. That's also according to this B of A Fund Manager Survey. The survey also showed a decrease in investors' allocations to tech, health care, and large-cap names, and an increase in industrials to the highest overweight since January 2018. So that also reaffirms that rotation that we saw play out last week with that selloff in tech shares.

Now, also want to point out, on a more optimistic note, we had 58% of investors surveyed saying that a new bull market has begun. That's more than double the 25% who felt that way in May. Alexis?

ALEXIS CHRISTOFOROUS: And I also know you've got your eye on two big earnings reports out after the bell-- Adobe and FedEx. FedEx, of course, seen as a bellwether, oftentimes, for the overall health of the economy. What's Wall Street expecting there?

EMILY MCCORMICK: Well, starting off with Adobe, one of those software tech names that has been performing very strongly for the year-to-date so far. We have those shares up 47% since January. For Adobe, we are expecting to see revenue grow 11% to $3.16 billion for that fiscal third quarter. Adjusted earnings are also expected to expand over last year to $2.41.

We saw last week with peer Oracle's earnings that cloud players are doing exceptionally well during the pandemic due to faster adoption with work-from-home and education-from-home taking hold. Now, Adobe Acrobat and Sign are expected to perform exceptionally strongly, since more consumers have been using electronic documents to do business. So a couple of things to watch there on Adobe.

Now, taking a look at FedEx, if we think about both FedEx and UPS last quarter, each reporting a huge increase in business to consumer e-commerce deliveries, way more so than we've seen for business-to-business deliveries. So that's something that's really helped boost their top line results, but has pressured margins since those are a bit less profitable than those B2B deliveries. And we also had FedEx announcing yesterday that it plans to add more than 70,000 positions in the lead up to this year's holiday season, with the majority of those going to FedEx Ground.

So potentially more visibility we'll be getting around FedEx's commentary about the holiday season, what they're expecting for the remaining months this year. And we are seeing shares trade higher in early trading. And they are up 56% for the year to date. Alexis?