US Big Tech earnings lift the mood as growth fears mount

Microsoft and Alphabet earnings lift a souring mood

• Tech giants beat estimates: Results from two of the biggest tech stocks have boosted sagging market sentiment 
• USD is giving back some of yesterday’s gains: The USD is slipping lower on major forex although the AUD remains weak
• Equities are rebounding: A decisive close lower on Wall Street is still weighing on European indices but US futures are rallying
• Oil is recovering, metals are flat: In commodities, yesterday’s sharp move lower on oil is recovering.

Strong results from the tech giants 

The quarterly earnings from Microsoft and Alphabet have decisively beaten analyst expectations. 

This has come at a welcome moment for Wall Street as mounting fears over an economic slowdown are weighing on broader risk appetite.

Alphabet beats

Google’s parent company Alphabet has announced first-quarter results that ticked a lot of boxes for Wall Street. 

• Q1 sales of $58.07bn beat the analyst consensus of $56.98.
• Net income of $15bn, which amounts to $1.17 per share also beat the consensus that was looking for $1.09bn.
• The company also announced a $70bn share buyback.
• There were positive results for both search and its growing cloud-computing business.

The shares initially increased almost 6% in after-hours trading, although pared these gains to be around 2% higher coming into today’s trading.

Alphabet accounts for around 15% of the NASDAQ 100.

Microsoft also beats

If the Alphabet results were seen as encouraging by the market, Microsoft was seen as outright impressive.

• Q3 sales of $52.9bn was a 7% increase compared to a year ago, with the consensus looking for $51bn.

• Net income of $18.3bn was also a 9.5% increase year-on-year to $2.45 per share, with analysts looking for $2.24.

• The results were driven by the huge increase in sales of cloud products, whilst there was a positive reaction to the analyst earnings call, with $10bn of investment into artificial intelligence development at OpenAI.

Microsoft shares rallied 8.5% in after-hours trading yesterday.

Microsoft holds a weighting of just over 12% of the NASDAQ 100. The strong performance after the results have been announced will certainly help the index higher today.

Concerns over the US slowdown grow

The gains that these results are generating for the NASDAQ 100 today bring a bit of pain relief for what is a mounting picture of economic slowdown in the US.

More data announced yesterday suggests that the US economic activity is slowing, however, consumer confidence is also wilting.

The Richmond Fed Manufacturing index has once more come in with a negative reading. 

A decline to -10 in April maintains the trend lower, after -5 in March, but also comes as a sizeable disappointment with some expecting an improvement back into positive territory.

Although the notoriously volatile New York Fed Manufacturing turned positive recently, other Fed surveys remain decisively negative, which suggests a continued economic slowdown across the US.

Consumer confidence in the US has also dropped back decisively in April as the high levels of inflation seem to be biting.

The US Conference Board’s Consumer Confidence dropped to 101.3 from 104.0 in March. This was much lower than the 104.0 that had been forecast.

This comes after the US Conference Board suggested last week that the US was moving towards recession later in the year.

A pick up in US futures, for now

With the tech results overnight, there is a rebound in US equity futures this morning. The question is can it last?

NASDAQ 100 futures (NAS100ft)

Last week, we were looking at the key support on the NASDAQ 100 futures at 12925 and yesterday this support was broken.

Reaction to today’s early rebound will be key.

Technical indicators suggest that if the rally today fizzles out then a corrective move could be developing.

• Another closing breach of the 12925 support would confirm the breakdown
• Daily RSI momentum has moved below 50.

A retreat towards the bottom of the uptrend channel and the support band 12485/12635 could be seen.

Initial resistance is at 13132.

S&P 500 futures

The futures fell sharply yesterday and the rebound overnight has done little to improve the immediate outlook.

• A close below support between 4092/4096 would complete a small top pattern.
• The daily RSI is already implying a breakdown.

A correction back towards 4010 would be the implied minimum target of the top.

Initial resistance is now 4133/4163.

Support and resistance levels for Forex, Commodities, and Futures/Indices 

Data: MT5/IXOne

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