Nasdaq Down 1% After Oracle Results and Ahead of Inflation Reports

Barry Adams
12 Sep, 2023
New York City

Trading in tech stocks dominated market sentiment and popular indexes traded down after Oracle's quarterly results disappointed some investors. 

Oracle hardware and software license sales fell short of market expectations and also the guidance for the current quarter put the market on alert for a possible weakness in corporate spending. 

Moreover, nervous investors sold stocks ahead of two inflation reports and retail sales data later in the week. 

Crude oil jumped to a new 10-month high on the supply worries and sustained demand despite the recent increases in prices. 

Energy stocks led gainers in early trading, following the rise in crude oil prices after the OPEC estimated global crude oil demand to grow by 225 million barrels per day, but lower than 2.44 million barrels per day increase estimated in 2023. 

Investors are awaiting consumer price inflation data on Wednesday and economists are expecting core inflation rate to hold steady but overall inflation may edge slightly lower in August 

 

U.S. Indexes & Yields 

The S&P 500 index traded down 0.6% to 4,461.09 and the Nasdaq Composite eased 1.04% to 13,773.61. 

The yield on 2-year Treasury notes decreased to 5.01%, 10-year Treasury notes inched lower to 4.28% and 30-year Treasury bonds edged down to 4.37%. 

Crude oil increased $1.51 to $88.86 a barrel and natural gas prices increased 0.06 cent to $2.67 a thermal unit. 

The dollar index edged lower to  104.90 mark and hovered near the 105 mark reached last week but higher than the low of 99.85 on July 13. 

Last week, the dollar index, which tracks the price of the U.S. dollar against major currencies, halted a five-day rally Friday but extended gains to the eight week in a row and rose to a six-month high on the expectations of higher interest rates. 

 

U.S. Stock Movers 

WestRock agreed to merge with Smurfit Kappa and form one of the largest packaging companies in the world. 

Smurfit WestRock, the newly formed holding company will be headquartered in Dublin, Ireland and will be listed on the London Stock Exchange and the New York Stock Exchange. 

WestRock stockholders will receive one Smurfit WestRock share and $5 cash and Smurfit Kappa shareholders will receive one share of the newly formed company. 

Smurfit Kappa shareholders will own 50.4% of the newly merged company. 

The combined packaging company will have about $34 billion in annual sales with about 65% of the revenue located in the Americas. 

WestRock jumped 7.7% to $36.75 and Smurfit Kappa Group Plc declined 8.0% in London trading to 2,824.0 pence. 

Oracle Corp dropped 9.2% to $126.71 after the database company reported weaker-than-expected revenue in the fiscal first quarter. 

Revenue in the quarter was $12.45 billion and adjusted earnings per share was $1.19, both fell short of some analysts' expectations. 

The company also guided lighter-than-expected revenue growth in the fiscal second quarter between 5% and 7% and adjusted earnings per share between $1.30 and $1.34. 

Cloud services and license support segment revenue increased 13% from a year ago to $9.55 billion but the cloud license and on-premises license segment revenue decreased 10% to $809 million.    

Hardware revenue fell 6% to $714 million. 

Casey's General Stores Inc jumped 4% to $246.30 after the retail chain reported better-than-expected quarterly results. 

Quarterly revenue increased to $3.87 billion and diluted earnings per share rose to$4.52.  

 

European Markets Turn Lower Ahead of Rate Decisions 

European markets traded mixed and investors awaited interest rate decisions from the European Central Bank and the U.S. inflation data. 

Investors looked for bargains in cautious trading amid uncertainty about the interest rate policy and looming global economic slowdown. 

German wholesale inflation declined for the fifth month in a row, the Federal Statistics Office or Destatis reported Tuesday. 

Producer price index declined 2.7% in August from a year ago because of a 15.8% decline in mineral oil products after prices eased from elevated prices compared to the previous year.  

Producer prices rose 0.2% from the previous month, reversing a 0.2% decline in July. 

On a monthly basis, mineral oil products prices rose 6.9% in August. 

The U.K. jobless rate rose to 4.3% in the three months to July from 4.2% in the previous three months, the Office for National Statistics reported Tuesday. 

UK weekly average earnings excluding bonuses rose 7.8% from a year ago to £617 in the three months to July 2023, the Office for National Statistics reported Tuesday. 

The weekly average wage growth rose by the same amount as in the previous period, matching the highest regular annual growth rate since comparable records began in 2001. 

Finance and business services reported the largest increase of 9.5%, followed by the manufacturing sector  with 8.1%, one of the largest annual regular growth rates for the manufacturing sector since 2001.

 

Europe Indexes & Yields

The DAX index decreased 0.5% to 15,715.33, the CAC-40 index eased 0.1% to 7,270.28 and the FTSE 100 index inched up 0.6% to 7,527.53.

In  the previous week, the DAX declined 1.6%, the CAC 40 fell 2.0% and the FTSE index dropped 0.3%. 

The yield on 10-year German bonds increased to 2.63%, French bonds traded lower to 3.17%, the UK gilts edged up to 4.43% and Italian bonds rose to 4.38%.

The euro edged lower to $1.071, the British pound to $1.246 and the U.S. dollar fetched 89.19 Swiss cents.

Brent crude increased $1.21 to $92.21 a barrel and the Dutch TTF natural gas decreased €0.58 to €35.26 per MWh.

 

Europe Stock Movers

Smurfit Kappa Group Plc declined 9.7% to 2,772.0 pence after the packaging company announced a merger deal with the U.S. based WestRock. 

Vallourec SA increased 0.2% to €12.32 after the French geothermal company reiterated its operating earnings outlook for the full-year 2023.

SAP SE declined 2.9% to €125.20 after the U.S. rival Oracle reported weaker-than-expected software license and hardware revenue in the fiscal first quarter.   

Associated British Foods plc soared 7.0% to 2,141.04 pence after the company raised its full-year profit estimate for the second time in four months.