Big Tech Earnings In focus, Market Averages Trade Lower Ahead of Rate Decision

Barry Adams
26 Jul, 2023
New York City

Stocks were under pressure as investors digested a fresh batch of earnings and all eyes were on the Fed. 

Investors reacted to Big Tech earnings and Microsoft and Google parent Alphabet reported rising revenues and earnings in its cloud segments. 

The Federal Reserve is set to announce its rate decision and its view on the economy later this afternoon and investors are factoring in a rate hike of 25 basis points. 

Investors will also be looking for clues how high rates are likely to go by the end of the year and Fed's views on inflation and inner-working of the economy.  

Fed's credibility is on line because despite the sharp decline in overall inflation to near 5% from as high as 8%, core inflation has stayed near 5% rate after ten rate hikes over the last fifteen months. 

The Fed has repeatedly reiterated that the central bank is committing to lowering inflation to 2% but has failed to specify by when. 

Moreover, how will households and businesses cope with housing prices that are now at least 100% and most services costs at least 50% higher over the last three years. 

Goods inflation has spread to service inflation and the Fed is not likely to erase price gains over the last three years by increasing rates by 25 basis points increments. 

 

U.S. Indexes & Yields 

The S&P 500 index traded down 0.2% to 4,560.46 and the Nasdaq Composite fell 0.1% to 14,127.97. 

The yield on 2-year Treasury notes decreased to 4.86%, 10-year Treasury notes inched lower to 3.86% and 30-year Treasury bonds edged down to 3.91%. 

Crude oil decreased $0.79 to $78.83 a barrel and natural gas prices decreased 5 cents to $2.67 a thermal unit. 

 

Stock Movers 

Microsoft Corp declined 3.3% to $339.58 after the company said revenue in the fiscal fourth quarter ending in June increased 8% to $56 b.2illion and net income soared to $20.08 billion from $16.74 billion a year ago. 

Microsoft stock declined after Azure revenue growth slowed to 26% from 27% in the previous quarter and 40% from a year ago. 

Cloud segment revenue increased 15% to $23.99 billion. 

Alphabet Inc soared 6.2% to $130.73 after the company reported better-than-expected earnings and revenue. 

Second quarter revenue increased 7% to $74.6 billion and ad revenue rose 3.3% to $58.1 billion and net income rose to $18.37 billion from $16 billion and diluted earnings per share increased to $1.44 from $1.21 a year ago. 

Revenue from the cloud segment which includes its Workspace segment jumped 26%.