Pre-Market Pulse 26th April – Google earnings save the day for equities and Mag7

Overnight – Google earnings save the day for equities and Mag7

Google saved the day in afterhours trade, rallying 13% as equities closed lower, but well off session lows Thursday as Meta cut come losses, though rising Treasury yields on economic data showing slowing growth, but sticky inflation, forced traders to push out bets on a first rate cut to December. 

Treasury yields climbed after data showed the U.S. economy grew by just 1.6% in the first quarter, on an annualised basis, much slower than expected, while a core underlying measure of inflation surprised to upside in Q1, rising 3.7%, pushing out rate-cut bets. Swaps traders are no longer fully pricing in a first Fed rate cut before December. The weaker growth but strong inflation raised fears of stagflation, but some economists noted that growth wasn’t as weak as the report suggested.

During the day session, before the Microsoft and Google results, big tech weighed down the market as Meta stock slid 10.6% to a near three-month low, after the Facebook parent forecast weaker-than-expected revenue for the second quarter due to higher spending on artificial intelligence. The stock had fallen as much as 16% intraday.  Also IBM fell 8% on weak first-quarter earnings, while the firm also announced a $6.4 billion deal to buy Hashicorp

Earnings:

• Meta Platforms -10% – Shares of Meta Platforms fell sharply in aftermarket trade on Wednesday after a disappointing outlook for second-quarter earnings vastly offset strong first-quarter earnings, with selling spilling over into other major technology stocks. Meta’s shares slid 15.3% to $417.83- a near three-month low- after it forecast second-quarter revenue in the range of $36.5 billion to $39 billion, or $37.75 billion at the midpoint- lower than estimates of $38.3 billion. Losses in Meta’s stock spilled over into other major internet firms, given that they set a dour tone for upcoming earnings in the sector.
• Microsoft -2.65% (+4% aftermarket)– reported Thursday fiscal third-quarter results that beat Wall Street estimates, as strong demand for artificial intelligence underpinned better-than-expected performance in its cloud business Azure.  Microsoft Corporation rose more than 4% in afterhours trading following the report.
• Alphabet -1.97% (+12% aftermarket) – shares popped more than 12% in after-hours trading Thursday after the Google owner reported better-than-expected top and bottom lines for the fiscal Q1 2024. Specifically, the tech behemoth posted earnings per share (EPS) of $1.89, topping the consensus estimates of $1.51. Revenue was reported at $80.54 billion, also above the projected $78.71 billion. Operating income for the quarter increased by 46% year-over-year to $25.5 billion, while net income soared to $58 billion, or $1.89 per diluted share
• Caterpillar -7% – often regarded as a bellwether of the economy, industrial machinery maker Caterpillar. fell 7% after they reported a mixed first quarter of 2024, with earnings surpassing analysts’ expectations but revenue falling short.
• Ford -1% – fell nearly 1% despite reporting stronger first-quarter earnings and positive guidance on free cash flow, weakness in its EV business was offset by stronger performance in its commercial business.