Microsoft kicked off earnings of tech giants yesterday, followed by Alphabet. While Microsoft exceeded expectations, Alphabet disappointed. Mixed results and market interest rates put pressure on the stock market.
Microsoft shares rise 3% after earnings beat forecasts
The US stock market saw a decline on Wednesday, as investors digested the quarterly results from tech giants Microsoft and Alphabet, and awaited reports from other influential companies.
Being the first of the big tech companies to report its Q3 earnings, Microsoft's shares increased by almost 3% after the release. These mega-capitalised technology companies that are currently publishing their reports are responsible for most of the S&P 500’s gains so far this year.
The software giant beat expectations after Tuesday's close with its fiscal first-quarter results as its investment in artificial intelligence fuelled growth in its Azure cloud business.
Alphabet disappoints, adding pressure to stock markets
Google parent Alphabet, on the other hand, disappointed investors because the technology company's cloud business had the slowest growth in at least 11 quarters.
These mixed results, along with market interest rates, did nothing to improve investors’ risk sentiment and put pressure on the stock market. Also, Treasury bond yields rose again yesterday after a brief period of relief. The 10-year bond approached 5%.
As a result, the Wall Street indices performed poorly, with the technological Nasdaq being the most affected with a drop of 2%.
Fears around the extension of the Israel-Hamas conflict to other areas rises
Regarding the conflict in Israel, yesterday the Wall Street Journal published reports that Israel agreed to delay the ground invasion of Gaza at the request of the American government. This delay is in wait of the United States to provide its troops stationed in the area with more anti-missile systems.
The news was initially taken as a positive sign, as the entry of the Israeli army into the Gaza Strip was the biggest concern for the market. This is why, at first, the stock markets recovered slightly, and the price of oil fell a few cents on the Dollar.
Sentiment shifted once investors had time to better think about the news. The update does not mean that the invasion of Gaza will not go ahead, it only means it is being delayed. It is also a sign that the United States is preparing for a potential extension of the conflict to the countries in the area. On this realisation, stocks were pushed down, and oil shot up more than $2 from the day's lows.
ECB to announce interest rate decision today
Today the decision of the Governing Council of the European Central Bank (ECB) on interest rates in the euro zone will be announced. As happened yesterday with the Bank of Canada, it is expected that rates will be left unchanged. If the forecast is correct, markets are not expected to be impacted.
TECH100 monthly chart, October 26, 2023. Source: CAPEX.com WebTrader.
Key Takeaways
- Microsoft and Alphabet reports earnings yesterday.
- Microsoft exceeded expectations and its stock rose 3%.
- Alphabet’s report showed that its cloud business had the slowest growth in at least 11 quarters.
- Market interest rates added pressure to the stock market.
- Treasury bond yields rose again yesterday after a period of brief relief.
- The Nasdaq index dropped 2%.
- Markets fears over the extension of the Israel-Hamas conflict are mounting.
- As concerns about the conflict began to grow, oil shot up by more than $2 from the day’s lows.
- The ECB will announce its interest rate decision today.
- Interest rates in the euro zone are expected to remain unchanged.
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Sources: Bloomberg, Reuters
