Tech Bounce Failed to Lift Broader Averages On Wall Street, European Markets Closed Down

Barry Adams
26 Apr, 2023
New York City

Benchmark indexes advanced on Wall Street after Microsoft-powered tech rally lifted broader averages. 

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 sales of Windows and Office products struggled with the weakness in personal computer markets. 

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. 

Enphase Energy Inc plunged 25% after the solar energy company reported weaker-than-expected earnings and also forecasted second quarter sales between $700 million and $750 million, lower than expected. 

On the economic front, mortgage applications rebounded and durable goods order rebounded in March on the back of a 78% surge in civilian aircraft orders. 

But non-defense orders for capital goods, generally considered as a proxy for business spending, declined 0.4%. 

International trade deficit declined and wholesale and retail inventories rose from the previous month, according to the preliminary data from the U.S. Census Bureau released on Wednesday. 

International trade deficit declined 8.1% or $7.4 billion to $84.6 billion in March after goods exports rose $4.9 billion to $172.7 billion and goods imports fell $2.5 billion to $257.3 billion. 

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 decreased 0.3% to 4,057.75 and the Nasdaq Composite index futures advanced 0.5% to 11,869.91. 

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. 

 

European Markets Turn Lower On Economic Growth Worries 

European markets traded down on economic worries despite improving corporate performance in the region. 

Market indexes were on the defensive for the second week in a row on the worries that higher interest rates and slowing business activities may negatively impact corporate earnings. 

The latest batch of earnings suggested positive performance from companies in France, Germany and the UK. 

The forward looking German consumer sentiment index improved to -25.7 for May from the revised prior reading of 29.3 in April, GfK Institute's data showed Wednesday.  

The consumer sentiment was the highest since April 2022, reflecting higher income expectations and sharply lower energy inflation.  

 

Indexes & Yields 

The DAX index decreased 0.5% to 15,795.73, the CAC-40 index dropped 0.8% to 7,466.66 and the FTSE 100 index declined 0.5% to 7,852.46. 

The yield on 10-year German Bunds eased to 2.34%, French bonds to 2.92%, the UK gilts to 3.68% and Italian bonds to 4.23%. 

The euro edged higher to $1.10, the British pound to $1.246 and the Swiss franc to 88.91 cents.

Brent crude fell $2.43 to $78.43 a barrel and the Dutch TTF natural gas fell €1.38 to €38.55 per MWh. 

 

Stock Movers 

Danone SA increased 1% to €61.04 after the French yogurt and food products maker lifted its 2023 sales outlook. 

Dassault Systemes SE dropped 7.8% to €34.51 despite the French software company reporting quarterly results that matched market expectations. 

Orange SA increased 1.9% to €11.66 after the French mobile telecom operator reported rising sales in the first quarter and the company reiterated its 2023 sales outlook. 

Safran SA fell 2.2% to €138.90 despite the aerospace company reporting sales increase of  29.4% to €5.3 billion, mainly fueled by propulsion and aircraft Interiors activities. 

As a part of its stock repurchase program for 9.4 million shares, the company has acquired 6.9 million shares and announced its plan to acquire €350 million of its shares between April 11 and June 9. 

Standard Chartered Plc rose 1.4% to 629.0 pence after the UK-based bank reported pre-tax profit in the first quarter increased 23%. 

Operating revenue in the first quarter rose 8% to $4.4 billion and pre-tax income rose to $1.7 billion from $1.4 billion and net interest margin increased 5 basis points to 1.63%.