Disappointing Earnings From Alphabet, Amazon And Apple

Key Takeaways

  • Disappointing Tech Earnings
  • Strong Jobs Report
  • Can Markets Continue To Rally?

Markets have staged an impressive rally so far this year. This week alone through Thursday, the S&P 500 is up 2% while the Nasdaq 100 is up 5%. The lone laggard has been the Dow Jones Industrial Average, which is flat on the week. What’s interesting to note here is that the Dow, while at one time a good barometer for markets, has since become an antiquated gauge largely because of how it is weighted. However, disappointing earnings from Alphabet, Amazon
and Apple
along with a much stronger than expected jobs report could put pressure on all indices.

Much of the strength in tech stocks this week came following impressive earnings from Facebook parent, Meta. After a better than expected earnings report Wednesday, the stock rallied 23%, its biggest single day percentage gain since 2013. The unexpectedly strong report may have had the effect of higher expectations for other tech companies on Thursday. However, investors got a dose of less than enthusiastic news following Thursday’s close.

parent company, Alphabet, disappointed the street while citing a broad slowdown in digital ad spending. Online retailer Amazon reported a slowdown in both shopping and their cloud computing business. Amazon Web Services (AWS) reported a revenue increase of 20%; however, it was the slowest growth rate for the sector since Amazon began reporting on it separately. That news comes following Microsoft
giving a similar outlook for their cloud services division and will be a sector worth watching. Meanwhile, for the first time in four years, Apple reported a quarterly revenue decline. That also broke a three year streak of sales and profit records. Finally, Starbucks
reported a miss on revenues despite beating expectations on same store sales. Worldwide same store sales increased 5%, with U.S. same store sales leading the way, up 10%. One interesting note is that in the case of both Apple and Starbucks, currency fluctuations hurt results as the U.S. dollar weakened in Q4.

The other big news today is going to be the surprising employment report. Economists were forecasting an unemployment rate of 3.6% and 185 thousand new jobs created. A much stronger than expected report showed 517 thousand new nonfarm jobs and a drop in unemployment to 3.4%. Hourly average earnings were up 4.4% from a year ago but up just 0.3% from December, which was drop from 0.4% in November. The robust report caught markets off guard, initially sending equity prices lower and bond yields higher.

All this combines to create a very interesting picture for markets. Despite a number of large scale layoffs, the job market continues to gaining strength. However, despite the low unemployment rate and new jobs being created, wages are holding flat and even slowing. Under any rational scenario, that would seem like a good thing. But sometimes markets have a way of seeing things in a migraine-inducing sort of manner. It will be interesting to see how the Fed digests this number and what, if any, impact it will have when they meet again next month.

For today, markets opened weak but regained some of those losses. I’m interested to see how the market digests the jobs report. VIX, which has been below 20 for two weeks now did move higher yesterday and I’ll be watching it today to see if it remains below that level. I’m also very curious how investors respond to the disappointing reports from Alphabet, Amazon and Apple. Recently, markets have largely shrugged off bad news and sent stocks higher. We saw that with Microsoft. Following a weaker than expected earnings report that initially sent the stock lower, shares of Microsoft have since rallied. Therefore, it will be very interesting to see if that trend continues or not. As always, I would stick with your investing plan and long term objectives.

tastytrade, Inc. commentary for educational purposes only.

Source link

Denial of responsibility! galaxyconcerns is an automatic aggregator around the global media. All the content are available free on Internet. We have just arranged it in one platform for educational purpose only. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials on our website, please contact us by email – [email protected]. The content will be deleted within 24 hours.

Leave A Reply

Your email address will not be published.