Stock investors are digesting disappointing earnings from tech giants Alphabet and Microsoft released after the market closed yesterday.
Earnings in details
Google reported slowest revenue growth since 2013 and its fifth consecutive quarter of declining sales growth, including the first drop in ad revenue for its YouTube platform.
Similarly, Microsoft sales growth also slowed due to eroding personal computer sales while income fell to the lowest level in more than two years. Facebook parent Meta Platforms is the big tech highlight today and expected to report a second consecutive quarter of slowing ad revenue.
Meta’s struggles have been well broadcast, so bulls are hoping that unimpressive earnings won’t add to the bearish sentiment that’s threatening the entire tech sector right now.
Other earnings due today include ADP, Boeing, Bristol Myers Squibb, Canadian Pacific, CME Group, Edwards Lifesciences, Ford, Norfolk Southern, Suncor Energy, and Thermo Fisher Scientific.
Overall, bulls still expect decent Q3 results will help keep stock prices buoyed but are looking ahead to a bigger boost from a shift in Fed policy.
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There is again a growing belief among many bulls that interest rate hikes will get smaller starting as soon as the central bank’s December meeting.
Bears, however, argue that inflation still remains too high for the Fed to consider easing up on its tightening program and any extended rallies will be short-lived as long as investors believe the Fed is going to keep lifting rates.
In particular, bears are pointing to bond yields that continue to surge, providing an increasingly attractive alternative to stocks.
Investors will be combing the details of updated monetary from the Bank of Canada today and the European Central bank on Thursday for clues as to where the US Fed might be headed next.
US data today will provide some more insights into how the overall economy is doing with advance reads on International Trade, and Retail and Wholesale Inventories today.
New Home Sales for September are also due today with analysts expecting a sizable drop to an annualized rate of around 585,000, versus 685,000 new home sales in August.
It’s worth noting that the S&P Corelogic Case-Shiller Home Price Index for August showed a +13% year-over-year gain, down from +15.6% the previous month.
In a statement, S&P managing director Craig Lazzara said the decline “clearly” shows the growth of home prices peaked this spring and that the “forceful deceleration may well continue.” I continue to believe we are in the midst of yet another bear market rally that may continue for the next couple for weeks. I am staying overweight “cash” and am not interested in chasing the market higher.
Investors Are Digesting Disappointing Earnings From Tech Giants
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