Tech Stocks and Broader Market Averages Rebounded After Microsoft Earnings Advanced

Barry Adams
26 Apr, 2023
New York City

Tech stocks led market averages higher After Microsoft reported better-than-expected earnings. 

Big tech earnings dominated market sentiment and investors will have first chance to react to positive earnings from several companies including Boeing, Chipotle Mexican Grill and CoStar Group. 

Despite the gloom and doom reported in financial media, publicly listed large and medium-sized corporations are reporting healthier quarterly results. 

Microsoft revenue rose on the back of intelligent cloud segment revenue surge but the sale of Windows and Office products struggled with the weakness in personal computer sales. 

Google's parent Alphabet also reported better-than-expected revenues despite weakness in advertising but cloud and other segment revenues supported the quarterly results. 

Boeing reported mixed quarterly results and reaffirmed its 2023 outlook and Chipotle Mexican Grill quarterly earnings doubled on the back of new stores and price hikes. 

On the economic front, investors are awaiting release of GDP data on Thursday and Personal Consumption Expenditure Price Index on Friday. 

 

Mortgage Applications Rebounded 

Mortgage applications increased 3.7% in the week ended April 21, rebounding from an 8.8% decline in the previous week, Mortgage Bankers Association reported Wednesday. 

Mortgage application for the home purchase increased 4.6% and refinance advanced 1.7% in the period. 

Mortgage rates increased for the second week in a row and touched to a one-month high on the expectations that the Federal Reserve will increase rate at its meeting next week. 

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $726,200 or less increased 12 basis points to 6.55%, following a 13 bps rise in the previous week. 

 

Indexes & Yields 

The S&P 500 index futures increased 0.2% to 4,100.50 and the Nasdaq Composite index futures advanced 0.9% to 11,924.0. 

The yield on 2-year Treasury notes inched up to 3.92%, 10-year Treasury notes rose to 3.42% and 30-year Treasury bonds held at 3.67%. 

Crude oil fell 34 cents to $76.71 a barrel and natural gas prices eased a fraction to $2.33 a thermal unit. 

 

Stock Movers 

Microsoft Corp jumped 7.9% to $297.50 after the company said revenue in the March quarter increased 7% to $52.9 billion, driven by the jump in cloud segment revenue.

Cloud segment revenue increased $22.1 billion, productivity and business processes increased 11% to $17.5 billion and personal computing segment decreased 9% to $13.3 billion. Microsoft search and news advertising revenue excluding traffic acquisition costs increased 10% but Windows OEM revenue plunged 28%.

Net income increased to $18.3 billion from $16.7 billion and diluted earnings per share advanced to $2.45 from $2.22 a year ago.

Microsoft returned $9.7 billion to shareholders in the form of share repurchases and dividends in the third quarter of fiscal year 2023.

Alphabet Inc declined 1% to $102.80 after the parent of Google said revenue in the first quarter ending in March rose 3% to $69.8 billion, sharply slower than the 23% increase in the quarter a year ago. 

Net income in the quarter fell to $15.1 billion from $16.4 billion and diluted earnings per share eased $1.17 from $1.23 a year ago.  

Google advertising, which includes Google search, network ad YouTube ads, edged slightly lower to $54.5 billion from $54.7 billion and cloud ads increased to $7.4 billion from $5.8 billion a year ago. 

Chipotle Mexican Grill, Inc rose 7.6% to $1,915.0 after the fast food chain operator reported higher earnings driven by new stores and price increases. 

Total revenue in the first quarter increased 17.2% to $2.4 billion and comparable restaurant sales advanced 10.9%. 

Net income increased to $291.6 million from $158.3 million and diluted earnings per share rose to $10.50 from $5.59 a year ago. 

CoStar Group Inc rose 0.4% to $68.75 after the real estate information services provider reported higher revenue and bookings in the first quarter. 

Revenue in the first quarter increased 13% to $584 million and net income declined to $87 million from $89 million and diluted earnings per share fell to 21 cents from 23 cents a year ago.