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Alphabet and Microsoft shares slide on results

 

Wednesday, October 26, 2022, 8.45am GMT

The news shaping the markets today

US President Joe Biden warned Russia against a nuclear attack in its ongoing war with Ukraine. The US dollar index traded slightly higher this morning on continued geopolitical concerns.


Australia’s annual inflation rate accelerated to 7.3% in the third quarter, from 6.1% in the previous quarter. Despite the figure being higher than estimates of 7.0% and the highest reading since Q2 1990, the AUD/USD forex pair remained elevated.


New Zealand’s ANZ Business Outlook Index fell to -42.7 in October, from -36.7 in the previous month, sending the NZD/USD pair lower in forex trading this morning.


The American Petroleum Institute said crude oil stockpiles in the US rose to 4.52 million barrels in the week of October 21, compared to a decline of 1.27 million barrels in the previous week. The news sent WTI crude oil futures lower this morning.


South Korea’s Business Survey Index for the manufacturing sector fell to 73 in October, hitting the lowest level since October 2020. However, the KRW/USD pair rose in forex trading this morning.

 

What’s happening: Shares of Google parent Alphabet and Microsoft Corporation declined in after-hours trading on Tuesday, following the release of quarterly results.

What happened: The two tech giants kickstarted the big-tech earnings season on Tuesday, reporting results after the closing bell.

Although Microsoft posted upbeat quarterly results, its revenue growth was the weakest in several years.

How were the results: Alphabet reported better-than-expected earnings for the latest quarter, while Microsoft’s quarterly revenue growth was the slowest in five years.

  • Alphabet reported revenues of $69.09 billion, up 6% year-over-year, but short of the consensus estimate of $70.9 billion. The company’s earnings came in at $1.06 per share, below Street expectations of $1.27 per share.
  • Microsoft’s revenues grew 11% to $50.1 billion, which topped market views of $49.8 billion. Its earnings of $2.35 per share came in higher than the consensus estimate of $2.32 per share.

Why it matters: The two tech giants released their results in an uncertain economic environment. The results from Alphabet and Microsoft, which have a combined market value of $3.235 trillion, are generated from several countries and are considered a barometer of the overall health of the global economy.

The latest results signalled a decline in spending by both consumers and businesses. The online advertising segment, which is the main source of income for Google Services, and the Search segment were impacted by a pullback by advertisers. Alphabet’s Search segment recorded revenues of $39.54 billion, missing expectations of $40.87 billion.

Microsoft said strength in the US dollar could continue to be an issue for its sales growth. Although revenues from Azure and other cloud services grew 35%, it fell short of expectations of 36.5% growth.

Microsoft also reported a decline in the PC market after recording strong gains during the covid-19 period. Worldwide PC shipments are down 19.5% from a year ago to 68 million units, according to Gartner.

How shares responded: Microsoft’s shares declined by 6.7% to $233.85, while Alphabet’s stock tumbled 6.58% to $97.60 in after-hours trading on Tuesday.

What to watch: Investors will keep an eye on rising inflation and interest rate hikes by central banks around the world, which could impact earnings of big tech companies during the holiday season.

The markets today

The Canadian dollar will be in focus today ahead of the Bank of Canada’s interest rate decision

Context: The CAD/USD forex pair moved higher on Tuesday amid an improvement in overall market sentiment.

Details: The loonie surged to its strongest intraday level in around three weeks to 1.3605 on Tuesday. Overall investor risk sentiment improved, resulting in equity markets around the world recording gains.

Global equity markets benefited from prospects of the US Federal Reserve slowing its interest rate hikes, following signs of softening in the country’s economy.

The Bank of Canada is scheduled to announce its rate decision today and is expected to announce another hike to contain inflation. The country’s annual inflation rate eased slightly to 6.9% in September, from 7% in the previous month, but came in ahead of market expectations of 6.8%. Excluding food and energy, prices accelerated 5.4% in September, from 5.3% in August.

WTI crude prices gained 0.9% to settle at $85.32 a barrel on Tuesday, providing support to the loonie, as oil is one of Canada’s major exports.

The CAD/USD forex pair rose around 0.7% to close at 1.3608 on Tuesday.

What to watch: Traders await the Bank of Canada’s interest rate decision. The central bank had raised its overnight rate by 75bps to 3.25% in September and is widely expected to hike rates further to 4% at its meeting today.

The release of GDP data, due on Friday, will also remain in focus.

Other Markets: European trading indices closed mostly higher on Tuesday, with the DAX 40, CAC 40 and STOXX Europe 600 up by 0.94%, 1.94% and 1.44%, respectively, and the FTSE 100 lower by 0.01%.

Support & resistances for today

Technical Levels News Sentiment
USD/JPY  – 148.17 and 148.30 Positive
AUD/USD – 0.6394 and 0.6409 Positive
Gold – 1660.25 and 1662.50 Negative
Silver  – 19.397 and 19.497 Positive
Dow Jones – 31823.80 and 31882.43 Negative

Market snapshot

Futures at 0400 (GMT)
EUR/USD (0.9958, -0.10%) Dow ($31,799, -0.24%) Brent ($91.04, -0.8%)
GBP/USD (1.1457, -0.13%) S&P500 ($3,835, -0.92%) WTI ($84.83, -0.6%)
USD/JPY (148.20, 0.18%) Nasdaq ($11,487, -1.94%) Gold ($1,661, 0.2%)

What else to watch today

France’s consumer confidence, initial jobless claims and unemployed persons, Eurozone’s loans to households, loans to non-financial corporations and money supply M3, US MBA mortgage market index, building permits, goods trade balance, wholesale inventories, new home sales, gasoline stocks, crude oil inventories and distillate stockpiles, Brazil’s producer prices, Russia’s industrial production, as well as China’s foreign direct investment.

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