NEW YORK, April 26 (Reuters) - Richly valued U.S. stocks

are leaving investors with little tolerance for disappointment,

raising the stakes ahead of a week in which two more technology

and growth giants are set to report.

Strong reports from Microsoft ( MSFT ) and Google parent

Alphabet on Thursday helped propel the S&P 500

to its biggest weekly gain since early November following its

first 5% pullback of the year. The S&P 500 is up about 7% in

2024 and some 24% since late October.

But investors punished a disappointing forecast from Meta

Platforms ( META ). The Facebook parent's stock tumbled over 10%

on Thursday after its report. A sales warning saw shares of

industrial bellwether Caterpillar ( CAT ) fall 7%.

More broadly, S&P 500 companies that have topped analyst

earnings estimates this quarter have seen their shares

outperform by a median of just 0.2%, JPMorgan strategists said.

By contrast, those that have missed earnings estimates have had

their shares lag by a median of 4%, the biggest such

underperformance for misses in at least eight years.

Earnings reports have been "pretty good," said Rick Meckler,

partner at Cherry Lane Investments. But "anyone that's missed in

any way is paying a pretty heavy price."

More earnings are in store in the coming week from the

so-called Magnificent Seven group of companies that drove

markets higher last year. Amazon ( AMZN ) reports on Tuesday and

Apple ( AAPL ) on Thursday. On Wednesday, the Federal Reserve

will release its latest monetary policy statement after

concluding its two-day meeting.

Some believe the market's nearly unabated run higher over

the past six months has made investors less forgiving of

earnings setbacks. The S&P 500 trades at 20 times forward

earnings estimates, well above its historic average of 15.7,

according to LSEG Datastream.

"We cautioned that potential earnings beats might not lead

to equity upside during the results season, given the already

strong equities run leading up to the earnings season, and

stretched positioning...," the JPMorgan strategists said.

"Indeed, stock price reactions in the US (have) been

underwhelming so far."

Shares of Tesla surged 12% earlier in the week

after the company said it would introduce new models by early

2025. Some investors attributed that to bargain hunting after a

painful selloff this year, which left the bar for good news much

lower. Tesla shares remain down over 30% for the year.

Rising Treasury yields could be another factor. Companies'

projected future profits are more heavily discounted in

analysts' models when bond yields rise, as investors can now get

a higher reward from risk-free government debt. The benchmark

10-year Treasury yield hit 5.74% this week, its highest level

since early November, following more evidence of stronger than

expected inflation.

Overall, however, 78% of S&P 500 companies have topped

analysts' earnings estimates for the first quarter, with

earnings on pace for a 5.6% rise from a year earlier, LSEG IBES

said on Friday.

Solid corporate results have grown more important as

climbing Treasury yields and stubborn inflation have raised

uncertainty about stocks, said Chuck Carlson, chief executive

officer at Horizon Investment Services.

Corporate profits are "coming through at a level that

can provide support for the market and kind of overcome some of

the wobbliness in the inflation and the interest rate

environment here," Carlson said.

Earnings could take a backseat if bond yields keep marching

higher or inflation data remains stronger than expected. While

investors do not expect any interest rate action from the Fed at

next week's meeting, they will be listening for the central

bank's insights on recent evidence of stronger than expected

inflation.

Expectations for interest rate cuts, which had been a key

driver of the rally, have faded following signs of economic

strength and sticky inflation. Futures markets on Friday showed

investors pricing in just 35 basis points in rate cuts for 2024,

compared to more than 150 priced in January.

Earnings have "been a positive, but what the market's more

concerned about, I would argue, is inflation and what the Fed's

going to do about it," said Scott Wren, senior global market

strategist at Wells Fargo Investment Institute.