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Shares of AI Rivals Microsoft Corporation and Alphabet Rise After Beating Earnings Expectations

DMO 27.04.2023 article image.jpg
Miguel A. Rodriguez
Miguel A. Rodriguez
27 April 2023

The latest earnings season continues with Microsoft Corporation, Alphabet, and Boeing Co exceeding predictions, while markets watch carefully for any news around First Republic Bank as it is said it could sell part of its assets. 

Although risk sentiment can be viewed as being somewhat better despite the setback that First Republic Bank suffered right at the beginning of the session yesterday, the North American stock markets once again experienced a session of high volatility with consistent ups and downs. 

After Microsoft Corporation posted better-than-anticipated results for the quarter and announced it was stepping up its efforts in artificial intelligence (AI), its shares increased by 8%. Alphabet, the parent company of Google and a contender in the AI segment, also exceeded forecasts, and its shares increased by 0.5%. 

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Shares of Boeing Co. increased by 3.4% after the aircraft manufacturer topped forecasts and announced it would increase 737 MAX output this year.  

The prediction for the S&P 500 Index's earnings decline has been lowered to just 3.9% as the market has grown more upbeat about the upcoming earnings season. Initially, a 5% reduction was anticipated. 

Following its collapse earlier on in the week due to the disclosure of withdrawals of deposits totalling about $100,000,000, First Republic Bank's shares dropped another 16%. After the bank's advisors suggested that it might contemplate selling a sizeable portion of its assets to a North American bank or group of banks, the market is now eager to learn more about a rescue plan for the institution. Concern in the market over the prospect that the crisis in the North American regional banking system may be more severe than anticipated and negatively impact risk sentiment in the markets, has been sparked by the First Republic Bank's instability. 

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In fact, US Treasury Bonds have risen significantly, driving yields down. In the case of the 2-year bond, this was less than 4%. 

The Federal Reserve's (Fed) upcoming decision may be affected by the strain in the North American financial sector. Even if a 25-bps hike is still anticipated, if the volatility persists, this could change. The Dollar interest rate curve already points to rate cuts by the end of this year. 

As it prepares for its upcoming policy meeting next week, the Fed will also be keeping an eye on this week's economic data. Durable goods orders climbed by 3.2% in March, above the forecasted gain of 0.7%, according to data released yesterday. The GDP statistic for the first quarter will be released today, and the preferred inflation indicator used by the Fed — Personal Consumption Expenditure (PCE) — will be released on Friday. 

 

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Sources: Bloomberg, Reuters 

This information/research prepared by Miguel A. Rodriguez does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views and consequently any person acting on it does so entirely at their own risk.The research provided does not constitute the views of KW Investments Ltd nor is it an invitation to invest with KW Investments Ltd. The research analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report.The research analyst in not employed by KW Investments Ltd. You are encouraged to seek advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit that conforms to your specific investment objectives, financial situation, or particular financial needs before making a commitment to invest. The laws of the Republic of Seychelles shall govern any claim relating to or arising from the contents of the information/ research provided. 

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Miguel A. Rodriguez
Miguel A. Rodriguez
Financial Writer

Miguel worked for major financial institutions such as Banco Santander, and Banco Central-Hispano. He is a published author of currency trading books.