Earnings and Margins Anxieties Keep Stocks In Holding Pattern

Barry Adams
24 Apr, 2023
New York City

Stocks were in a holding pattern as investors await a barrage of earnings from tech and other leading companies this week. 

About 800 companies are scheduled to report earnings this week including leading tech companies Microsoft, Alphabet, Amazon, MasterCard and Meta Platforms. 

So far about 300 companies have released earnings and most companies have managed to meet sharply lowered earnings estimates. 

But the growing anxieties about the economic slowdown, falling business margins and elevated costs have kept investors on edge. 

Moreover, investors have been dialing down earnings expectations and analysts are signaling more downward revisions maybe in store for tech, transportation and retail companies. 

Tech companies are expected to report a sharp decline in advertising revenues and falling margins as businesses hold back spending on digital marketing and acquiring new software services. 

Investors are also cautious ahead of the rate decision next week and most market participants are factoring a 25-basis points increase in rates. 

Some investors are hoping that the Federal Reserve will offer more clarity on the future rate path and may be ready to pause after several rate increases in a row over the last fourteen months. 

 

Indexes & Yields 

The S&P 500 index fell 0.1% to 4,128.33 and the Nasdaq Composite index decreased 0.5% to 12,013.01. 

The yield on 2-year Treasury notes declined to 4.14%, 10-year Treasury notes fell to 3.51% and 30-year Treasury bonds hovered near 3.73%. 

Crude oil rose 53 cents to $78.63 a barrel and natural gas futures decreased 2 cents to $2.20 a thermal unit. 

 

Stock Movers 

Coca-Cola Company increased 0.5% to $64.35 after the beverage maker reported better-than-expected results in its latest quarter. 

Revenue in the first quarter increased 5% to $11.0 billion and net income attributable to shareholders rose 12% to $3.1 billion from $2.8 billion and diluted earnings per share advanced 72 cents from 64 cents a year ago. 

Revenue growth was driven by 11% increase in price and volume mix and 1% growth in concentrate sales. 

Unit case volume was flat in North America but declined 3% in Europe, Middle East and Africa after prices rose 22% in local currencies. unit case volume surged 10% in Asia Pacific on the price increase of 5%. 

Strong growth in unit case volume in Western Europe, Pakistan and South Africa was more than  offset by the suspension of business in Russia and the impact of the earthquake in Türkiye in February. 

The company reiterated its full-year 2023 revenue growth outlook between 7% and 8% and estimated commodities price inflation in mid single-digit on comparable cost of goods sold. 

Bed Bath & Beyond Inc plunged 31% to 20 cents and extended this year's loss to 87% after the company filed for bankruptcy protection on Sunday. 

The struggling household goods retailer had warned for months that the company may have to seek bankruptcy protection in the event it fails to raise enough capital. 

Credit Suisse Group AG increased 2.1% to 90 cents after the company reported a surge in revenue in its latest quarter and said deposit outflow slowed to 61 billion Swiss francs. 

The adjusted revenue, which excludes the write down of additional tier 1 bonds, declined and the bank swung to a loss. 

Walt Disney Company fell 0.4% to $99.14 and the company announced a second layoff on Monday that is expected to hit employees in California, Connecticut and New York.

The company had earlier said it plans to eliminate about 7,000 jobs as a part of its reorganization that is expected to save $5.5 billion. 

 

European Markets On Hold, German Business Confidence Improved 

European markets traded in a tight range and investors digested a fresh batch of earnings amid lingering economic slowdown worries. 

Market sentiment was cautious in trading in Paris, Frankfurt and London and investors reacted to domestic corporate earnings. 

In cautious trading, resource and energy stocks led the decliners and tech stocks were in focus ahead of the release of earnings from mega-cap companies Meta, Alphabet, Amazon and Microsoft this week. 

Across Europe, banks were in focus ahead of the earnings releases this week from Barclays, Credit Suisse, Deutsche Bank, Santander and UBS. 

In the region's economic news, German business confidence showed an improvement for the sixth month in a row, Ifo Institute reported Monday. 

The overall German IFO business climate index increased to 93.6 in April from 93.2 in March, the highest level since February last year. 

The current situation index eased to 95.0 from 95.4 and expectations index, which tracks business outlook in the coming months, improved to 92.2 from 91.0 in March. 

 

Indexes & Yields 

The DAX index decreased 17.71 points to 15,863.95, the CAC-40 index dropped 3.14 points to 7,573.86 and the FTSE 100 index declined 1.93 points to 7,912.20. 

The yield on 10-year German Bunds edged higher to 2.49%, French bonds to 3.05%, the UK gilts to 3.78% and Italian bonds to 4.36%. 

The euro inched higher to $1.101, the British pound to $1.24 and Swiss franc to 88.96 cents. 

Brent crude oil fell 14 cents to $81.51 and the Dutch TTF natural gas futures fell 74 cents to $39.42 per MWh.  

 

Europe Stock Movers 

Philips NV gained 11.2% to €19.28 after the consumer electronics and technology company reported higher operating earnings and sales in its first quarter. 

Group sales increased 2% to €4.17 billion from €3.92 billion and adjusted EBITA increased to 359 million from 243 million a year ago.   

Comparable sales increased 6% driven by a rise in double-digit sales in its diagnostics and treatment unit and low single-digit increase in sales in connected care businesses. 

Net loss increased after the company set aside 575 million related to the settlement of a class action lawsuit stemming from the Respironics recall in the U.S. 

Net loss expanded to 665 million from 151  million and loss per share rose to 75 cents from 14 cents a year ago. 

Software AG soared 49.4% to €29.84 after the German software company agreed to a deal from the private equity firm Silver Lake. 

Credit Suisse Group AG increased 2.1% to  Sfr 0.81 after the Swiss bank said net asset outflow in the first quarter was Sfr 61 billion or $68 billion. 

Resource and energy companies traded lower after crude oil and natural gas prices eased on the demand worries. 

BP Plc, TotalEnergies SE, Repsol SA, Shell Plc and Eni SpA dropped between 0.5% and 1.3% after Brent crude oil and natural gas prices eased. 

Salzgitter AG decreased 0.2% to €36.82 after the German steel company said first quarter earnings plunged nearly 50% but the company reaffirmed its full-year outlook. 

The company estimated profit in the first quarter of €183 million compared to €465 million in the similar period in 2022. 

The company reiterated its 2023 sales of €13 billion compared to €12.6 billion in 2022 and earnings before interest, taxes, amortization and depreciation or EBITDA between €750 million and €850 million.