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Market Snapshot: U.S. stock rally set to stall after Microsoft and Alphabet earnings disappoint

S&P 500 is on course to snap three-day winning streak which came on hopes the Federal Reserve may be less aggressive in hiking rates after some weak economic data Read More...

U.S. stock futures fell on Wednesday after results from tech behemoths Microsoft and Alphabet disappointed investors.

How are stock-index futures trading
  • S&P 500 futures ES00, -0.61% dipped 29 points, or 0.8% to 3841
  • Dow Jones Industrial Average futures YM00, +0.22% slipped 31 points, or 0.1% to 31,847
  • Nasdaq 100 futures NQ00, -2.05% eased 200 points, or 1.8% to 11,513

On Tuesday, the Dow Jones Industrial Average DJIA, +0.04% rose 337 points, or 1.07%, to 31837, the S&P 500 SPX, -0.71% increased 62 points, or 1.63%, to 3859, and the Nasdaq Composite COMP, +2.29% gained 247 points, or 2.25%, to 11199. The S&P 500 is up 7.6% so far in October, but remains down 19% for the year-to-date.

What’s driving markets

Stocks were on course to snap a three-day winning streak after poorly-received earnings reports from Microsoft MSFT, -7.42%, Alphabet GOOG, -7.74% and Texas Instruments TXN, -5.53% poured cold water on bulls’ new-found optimism. All three shares were trading at least 6% lower in premarket trading.

The S&P 500 has jumped 5.3% since Thursday’s close as a generally positive third quarter earnings season, and hopes the Federal Reserve may be less aggressive in hiking rates after some weak economic data, sparked another burst of risk appetite.

“The latest data was good for inflation expectations, and good for recession fears, which both temper the Fed hawks a week before the Fed is preparing to announce another 75 basis point hike in its rates,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

Ian Williams, analyst at Peel Hunt, agreed. “Most of the earnings news released in the past 24 hours provided reassurance in the face of the economic downturn, and a pullback in yields also helped equity market sentiment yesterday,” he said.

Disappointing Alphabet and Microsoft numbers hit after the close Tuesday, alongside equally gloomy results from Texas Instrument.

“With its chips used across a variety of goods, the [T.I.] CEO’s comments about weakness in both personal electronics and industrial sectors is telling about demand in the broader economy,” said analysts at Deutsche Bank.

Attention will next turn to results from Meta META, -3.93%, due after the market close, and then Apple AAPL, -1.61% and Amazon.com AMZN, -4.27% on Thursday.

Helping to alleviated losses in the broader indices is the continued slide on Wednesday in bond yields TMUBMUSD10Y, 4.029% and the dollar DXY, -0.57%.

In U.S. economic data, the trade deficit in goods widened 5.7% in September to $92.2 billion as a strong dollar hindered exports.

Companies in focus
  • Visa Inc. V, +2.87% shares rose 1.5% in premarket trading Wednesday, after the company topped earnings expectations for its latest quarter Tuesday. Payments volume at grew 10% in the fiscal fourth quarter, while processed transactions increased 12%. Visa’s revenue rose to $7.79 billion from $6.56 billion and came in ahead of the FactSet consensus, which was for $7.55 billion.
  • Chipotle Mexican Grill Inc. CMG, -3.80% shared dipped 1.5% Wednesday after the restaurant chain on Tuesday reported continued growth, with third-quarter profit beating analysts’ expectations, though its price increases have caused lower-income customers to pull back.
  • Skechers USA Inc. SKX, -7.65% shares dropped 12.5% in premarket trading Wednesday after the maker of sneakers missed profit expectations for its latest quarter and delivered an outlook that came in below the consensus view. The company reported third-quarter net earnings of $85.9 million, or 55 cents a share, down from $103.1 million, or 66 cents a share, in the year-earlier quarter.

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