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Nasdaq Futures Plunge as Alphabet’s Cloud Business Revenue Disappoints, Meta Earnings on Tap

Barchart - Wed Oct 25, 2023

December Nasdaq 100 E-Mini futures (NQZ23) are trending down -0.61% this morning as disappointing results from Alphabet’s cloud business overshadowed upbeat earnings results from Microsoft while investors looked ahead to the next round of corporate earnings.

Alphabet Inc (GOOGL) slumped over -6% in pre-market trading after the company reported weaker-than-expected Q3 revenue from its cloud computing unit, overshadowing better-than-expected overall results. At the same time, Microsoft Corporation (MSFT) rose more than +3% in pre-market trading after the tech giant posted stronger-than-expected Q1 results, aided by strong growth in its Azure cloud. 

In Tuesday’s trading session, Verizon Communications Inc (VZ) climbed over +9% after the U.S. wireless carrier raised its full-year free cash flow guidance. Also, 3M Company (MMM) gained more than +5% after the industrial company posted upbeat Q3 results and lifted its annual adjusted profit forecast. In addition, Coca-Cola Co (KO) rose over +2% after the beverage giant reported stronger-than-expected Q3 results and boosted its full-year organic sales guidance. On the bearish side, IONQ Inc (IONQ) tumbled more than -12% after announcing that co-founder and chief science officer Chris Monroe would be leaving the company.

Economic data on Tuesday showed that the U.S. S&P Global manufacturing PMI unexpectedly rose to a 6-month high of 50.0 in October, stronger than expectations of 49.5. Also, the U.S. October S&P Global services PMI rose to a 3-month high of 50.9, stronger than expectations of 49.8. At the same time, the U.S. Richmond manufacturing index moderated to +3 in October, in line with expectations. 

“As we’ve seen interest rates persistently rise, there has been this expectation of a dramatic slowdown in the economy which would impact earnings and we’re not seeing it yet. The ‘yet’ part is what’s got everybody scratching their heads, you’ve got relatively strong economic numbers coming in for the third quarter and numerous companies in various sectors exceeding analysts’ expectations,” said Hugh Anderson, managing director at HighTower Advisors.

U.S. rate futures have priced in a 97.1% chance of no hike at the November FOMC meeting and a 29.1% chance of a 25 basis point rate increase at December’s monetary policy meeting.

Meanwhile, Federal Reserve Chair Jerome Powell is set to speak at the Moynihan Lecture in Social Science and Public Policy in Washington, D.C., later today.

Third-quarter earnings season picks up steam, with investors awaiting fresh reports from major companies today, including Meta Platforms (META), T-Mobile US (TMUS), IBM (IBM), and Boeing (BA). According to data from LSEG, earnings are expected to rise 1.7% year-over-year in Q3 for S&P 500 companies.

Today, all eyes are focused on U.S. New Home Sales data in a couple of hours. Economists, on average, forecast that September New Home Sales will stand at 680K, compared to the previous value of 675K.

Also, investors are likely to focus on the U.S. Building Permits data, which was at 1.541M in August. Economists foresee the September figure to be 1.473M.

U.S. Crude Oil Inventories data will be reported today as well. Economists estimate this figure to be +0.239M, compared to last week’s value of -4.491M.

In the bond markets, United States 10-year rates are at 4.862%, up +0.45%.

The Euro Stoxx 50 futures are down -0.34% this morning as investors digested a series of mixed corporate earnings results. Losses in real estate and luxury stocks are leading the overall market lower. A survey showed on Wednesday that German business sentiment improved more than expected in October, snapping five consecutive months of declines. In corporate news, Kering (KER.FP) fell over -3% after the Gucci owner reported a bigger-than-expected drop in Q3 sales. Also, Reckitt Benckiser Group Plc (RKT.L.EB) dropped more than -4% after the maker of Dettol and Lysol cleaning products posted weaker-than-expected Q3 like-for-like sales. At the same time, Deutsche Bank Ag (DBK.D.DX) climbed over +7% after the German lender reported better-than-expected Q3 figures.

Germany’s Ifo Business Climate Index, Germany’s Business Expectations, and Germany’s Current Assessment data were released today.

The German October Ifo Business Climate Index came in at 86.9, stronger than expectations of 85.9.

The German October Business Expectations stood at 84.7, stronger than expectations of 83.3.

The German October Current Assessment arrived at 89.2, stronger than expectations of 88.5.

Asian stock markets today settled in the green. China’s Shanghai Composite Index (SHCOMP) closed up +0.40%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.67%.

China’s Shanghai Composite today closed higher, buoyed by government support plans, which include the issuance of additional sovereign debt and an increase in the budget deficit ratio. The country’s legislature approved a plan to raise the fiscal deficit ratio for 2023 to about 3.8% of gross domestic product, up from the 3% target set in March, which entails the issuance of an additional 1 trillion yuan in sovereign debt in the fourth quarter to support disaster relief and construction. Meanwhile, Hong Kong-listed property stocks climbed on Wednesday after Hong Kong Chief Executive John Lee announced a plan to reduce the home purchase tax for non-residents from 15% to 7.5%, along with halving the tax for residents purchasing a second home. John Lee also announced that the city would reduce the stock trade stamp duty from 0.13% to 0.10%. In other news, troubled Chinese developer Country Garden Holdings Co. was deemed to be in default on a dollar bond for the first time ever.

“It came to the market as a surprise. China rarely revises its budget. Part of the funds raised will be utilized next year. Hence, this helps to boost the growth outlook beyond Q4,” said Zhiwei Zhang, chief economist of Pinpoint Asset Management. 

Japan’s Nikkei 225 Stock Index closed higher today, tracking a positive overnight session on Wall Street, while Beijing’s stimulus measures also boosted sentiment. Financial and consumer cyclical stocks led the gains on Wednesday. Chip stocks also advanced, with Screen Holdings Co Ltd climbing over +3% and Tokyo Electron rising more than +1%. Meanwhile, Reuters reported on Wednesday that the Japanese government is exploring the possibility of allocating roughly $33 billion for distributing payments to low-income households and implementing an income tax cut as part of a package of measures to mitigate the blow to households from rising living costs. In other corporate news, semiconductor equipment company Kokusai Electric Corp. surged over +11% in its trading debut on the Tokyo Stock Exchange. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -1.95% to 22.11.

Pre-Market U.S. Stock Movers

Alphabet Inc (GOOGL) slumped over -6% in pre-market trading after the company reported weaker-than-expected Q3 revenue from its cloud computing unit, overshadowing better-than-expected overall results.

Microsoft Corporation (MSFT) rose more than +3% in pre-market trading after the tech giant posted stronger-than-expected Q1 results, aided by strong growth in its Azure cloud. 

Texas Instruments Incorporated (TXN) slid over -5% in pre-market trading after the analog semiconductor company reported weaker-than-expected Q3 revenue and provided downbeat Q4 guidance.

Stride Inc (LRN) climbed more than +11% in pre-market trading after the company posted upbeat Q1 results and provided above-consensus FY24 revenue guidance.

Gap Inc (GPS) gained over +2% in pre-market trading after Wells Fargo upgraded the stock to Overweight from Equal Weight.

Chewy Inc (CHWY) rose about +2% in pre-market trading after UBS upgraded the stock to Neutral from Sell.

You can see more pre-market stock movershere

Today’s U.S. Earnings Spotlight: Wednesday - October 25th

Meta Platforms (META), Thermo Fisher Scientific (TMO), T-Mobile US (TMUS), IBM (IBM), ServiceNow Inc (NOW), Boeing (BA), ADP (ADP), CME Group (CME), Equinix (EQIX), KLA Corp (KLAC), General Dynamics (GD), Moody’s (MCO), O’Reilly Automotive (ORLY), Roper Technologies (ROP), Hess (HES), Amphenol (APH), Norfolk Southern (NSC), Old Dominion Freight Line (ODFL), Edwards Lifesciences (EW), Banco Santander Brasil ADR (BSBR), Hilton Worldwide (HLT), Baker Hughes (BKR), Waste Connections (WCN), Ameriprise Financial (AMP), Otis Worldwide (OTIS), VICI Properties (VICI), United Rentals (URI), Fortive (FTV), Agnico Eagle Mines (AEM), AvalonBay (AVB), Align (ALGN), Raymond James Financial (RJF), Molina Healthcare (MOH), Invitation Homes (INVH), United Microelectronics (UMC), Teledyne Technologies (TDY), Westinghouse Air Brake (WAB), Veralto (VLTO), EQT (EQT), Everest (EG), Rollins (ROL), Mid-America Apartment (MAA), Vertiv Holdings Co (VRT), IDEX (IEX), Avery Dennison (AVY), Teradyne (TER), Sun (SUI), Graco (GGG), Avangrid Inc (AGR), Owens Corning (OC), Flex (FLEX), Globe Life (GL), New Oriental Education&Tech (EDU), Morningstar (MORN), Universal Health Services (UHS), Antero Resources Corp (AR), Churchill Downs (CHDN), AptarGroup (ATR), Chemed (CHE), CACI (CACI), Fortune Brands (FBIN), SEI (SEIC), Mattel (MAT), Whirlpool (WHR), Lithia Motors (LAD), Weatherford (WFRD), Wyndham Hotels (WH), Stifel (SF), Landstar (LSTR), Option Care Health (OPCH), Antero Midstream (AM), Trinet Grou (TNET), Pilgrims Pride (PPC), MSC Industrial Direct (MSM), Evercore (EVR), Alamos Gold (AGI), Allison Transmission (ALSN), Western Union (WU), Valmont Industries (VMI), Flowserve (FLS), BOK Financial (BOKF), Prosperity Bancshares (PB), Ryder System (R), Silgans (SLGN), OneMain Holdings (OMF), Element Solutions (ESI), Taylor Morn Home (TMHC), NewMarket (NEU), CNX Resources (CNX), ASGN (ASGN), Mr. Cooper (COOP), Essential Properties (EPRT), Blackstone Mortgage (BXMT), United Bankshares (UBSI), Kilroy (KRC), Celestica Inc. (CLS), Pegasystems (PEGA), Group 1 Automotive (GPI), EPR Properties (EPR), Integra (IART), SLM (SLM), CONMED (CNMD), Quantumscape (QS), Life Time Holdings (LTH), Goosehead Insurance (GSHD), Methanex (MEOH), Oceaneering International (OII), Travel + Leisure Co (TNL), Plexus (PLXS), Constellium Nv (CSTM), First Interstate BancSystem (FIBK), M/I Homes (MHO), CVB Financial (CVBF), Navient (NAVI), MYR Group (MYRG).

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On the date of publication, Oleksandr Pylypenko did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

Provided Content: Content provided by Barchart. The Globe and Mail was not involved, and material was not reviewed prior to publication.