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Alphabet Crushes Q4 Earnings Expectations

The news shaping the markets today

New Zealand’s unemployment rate eased to an all-time low of 3.2% in the fourth quarter, from 3.4% in the earlier quarter. However, the NZD/USD forex pair remained under pressure after the news due to strength in the US dollar.


Indonesia’s manufacturing PMI rose to 53.7 in January, from 53.5 in the previous month. The latest reading represented the fifth consecutive month of an improvement in business conditions, which sent the IDR/USD pair higher in forex trading this morning.


The Philippines reported a decline in the IHS Markit manufacturing PMI to 50.0 in January, from a nine-month high of 51.8 a month ago, mainly due to a rise in covid-19 cases. The news exerted pressure on the PHP/USD forex pair.


Greece’s manufacturing PMI fell to a six-month low of 57.9 in January, from 59.0 in the prior month. Although this was the eleventh straight month of expansion in the manufacturing sector, the EUR/USD pair remained flat in forex trading this morning.


Brazil reported a trade deficit of $0.176 billion in January, versus a deficit of $0.205 billion in the year-ago month. The BRL/USD forex pair remained flat after the news.

 

What’s happening
Shares of Google-parent Alphabet surged in after-hours trading on Tuesday, after the company reported better-than-expected results for its fourth quarter.

What happened
A spike in Alphabet’s internet advertising business drove overall sales in the quarter. Another announcement made by management on Tuesday contributed to the stock’s rally.

How were the results:

The Mountain View, California-based company reported growth in revenues and earnings for the fourth quarter, with both metrics exceeding market views.

  • Revenues surged 32% year-over-year to $75.3 billion, beating the consensus estimate of $72.1 billion.
  • Profits jumped 36% to $20.6 billion.
  • Earnings came in at $30.69 per share, significantly higher than the Street expectations of $27.48 per share.

Why it matters:

Although the ongoing earnings season has been good, it is less impressive than previous quarters, with some majors like Goldman Sachs Group missing expectations and Netflix issuing weak projections.

Alphabet changed the narrative by reporting strong results, providing support to tech stocks and inspiring investors to brush off concerns around the tech-boom ending as the pandemic wanes. The company suffered more than other tech firms with the outbreak of the pandemic, mainly due to a massive decline in travel ad spend. However, the Goole parent came out stronger.

Alphabet’s 2021 sales surged 41% to a record $258 billion, after rising just 13% in 2020 as advertisers lowered their spending during the initial months of the pandemic. The strong results in the latest quarter were driven by a spike of around 36% in revenues from search ads, which is the company’s main business.

YouTube advertising revenues reached $8.6 billion, while Google Cloud revenues hit $5.5 billion. The company also reported record sales from Pixel phones.

The company’s total costs rose 27% to $178.9 billion in 2021 with a resumption of hiring and construction to the pre-pandemic levels.

Alphabet announced plans of a 20-for-1 stock split, which will help make its stock more affordable for retail traders.

 

How shares responded: Alphabet’s shares surged 9.2% to $3,005.00 in after-hours trading, following the release of quarterly results on Tuesday. The stock had shed 5% over the past month. Shares of other tech giants, including Meta Platforms and Amazon, on optimism after Alphabet’s strong earnings.

 

What to watch: Investors will monitor the approval of Alphabet’s stock split. Markets will also keep an eye on earnings results from other tech majors, including Amazon and Meta Platforms, which are set to release their reports this week.

 

The markets today

European stocks will be in focus today ahead of inflation report from the common bloc

 

Context: European stocks recorded gains on Tuesday, kicking off trading in the new month on a strong note.

Details: Markets in Europe began February trading on a positive note, extending gains from the previous session. In January, the pan-European Stoxx 600 had recorded its worst month since October 2020, amid fears of interest rate hikes.

The slowdown in Eurozone’s GDP growth remained a concern. Data released on Monday had showed that the Eurozone economy expanded by merely 0.3% in the fourth quarter, representing a sharp slowdown from the 2.3% growth recorded for the previous three months.

Investor sentiment was lifted by a decline in the bloc’s unemployment rate to 7% in December, from 7.1% a month ago.

The pan-European Stoxx 600 gained 1.28% to close at 474.86 on Tuesday, with shares of basic resources leading the surge. Almost all sectors settled the session in positive territory.

Data released on Tuesday showed an acceleration in France’s annual inflation rate to 2.9% in January, from 2.8% in December. Despite this, the CAC 40 gained 1.43% to close at 7,099.49.

Germany’s retail sales surprisingly fell 5.5% in December, while the country’s unemployment rate eased for a fourth straight month to 5.1% in January. The DAX 40 added 0.96% on Tuesday.

London’s FTSE 100 gained 0.96% on Tuesday, with investors awaiting the Bank of England’s monetary policy decision due on Thursday. UK’s manufacturing PMI came in at 57.3 for January, higher than a preliminary reading of 56.9.

What to watch: Traders await inflation data from the Eurozone today. The annual inflation rate in the bloc is expected to ease to 4.4% in January, from a record high of 5% in December.

Other Markets: US indices closed higher on Tuesday, with the Dow Jones, S&P 500 and Nasdaq 100 by 0.78%, 0.69% and 0.60%, respectively.

Support & resistances for today

Technical Levels News Sentiment

GBP/USD – 1.3521 and 1.3524



Positive


EUR/GBP – 0.8334 and 0.8338


Negative


FTSE 100 – 7,521.47 and 7,547.16


Negative


S&P 500 – 4,523.16 and 4,545.16


Positive


Gold – 1,797.65 and 1,798.80 Negative

 

Market snapshot

What else to watch today

France’s government budget value and car registrations, Brazil’s IPC-Fipe inflation and industrial output, Spain’s unemployment change and foreign tourist arrivals, Italy’s consumer price index, US Logistics Manager’s Index, MBA mortgage applications, ADP employment change, crude oil inventories, gasoline stocks change, heating oil stocks and distillate stocks, Mexico’s foreign exchange reserves, Canada’s value of building permits, Russia’s industrial production and corporate profits, Italy’s car registrations, OPEC and non-OPEC ministerial meeting, as well as Argentina’s tax revenue.


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