Wall Street stocks rise slightly as Microsoft gains on earnings
U.S. stocks edged higher amid mixed earnings on Wednesday as strong gains from Microsoft helped ease investor sentiment after a tech selloff earlier in the week.
The S&P 500 added 0.2%, heading for posting its worst monthly performance since markets fell in March 2020. The tech-heavy Nasdaq Composite was little changed.
Microsoft, which has a market capitalization of $2 billion, beat analysts’ revenue and profit expectations in the last quarter, with chief executive Satya Nadella predicting that tech spending would remain strong even as economic growth slows. .
Meanwhile, Google’s parent company Alphabet reported a $1.5 billion drop in quarterly profits after Tuesday’s closing bell, citing a slowdown in European advertising spending at its YouTube division, driven by the invasion of Ukraine by Russia.
Prior to this earnings season, some investors had hoped that the dominance of Big Tech groups would secure their finances and relatively high valuations against the economic pressures of war and the impact of soaring inflation on household finances. Apple and Amazon have yet to release their results.
“This sector was priced to perfection and set up to fail,” said Julian Howard, senior investment director for multi-asset solutions at fund manager GAM. “Anything that’s not really good [earnings] beat is going to be severely punished by the market.
But Microsoft’s performance provided reassurance, said Antoine Lesne, head of research and strategy at State Street SPDR ETF. “Revenues aren’t that bad,” he said. “The next big question is whether we are past the peak of inflation? We believe some rigidity will persist and central banks will need to tighten, which [high growth tech] After.”
In government debt markets, the yield on the 10-year US Treasury rose 0.1 percentage point to 2.84%, after a wave of safe-haven buying earlier in the week. The yield on the two-year policy-sensitive note rose 0.1 percentage point to 2.6%.
The dollar index hit its highest level since 2017 after US Federal Reserve Chairman Jay Powell signaled the central bank was ready for a series of rate hikes to combat soaring oil prices. consumption. But tough social restrictions in China, stemming from the nation’s zero Covid policy, have muddied investors’ inflation forecasts.
“The markets are trying to sort out the economic consequences of the shutdowns in China,” said Gergely Majoros, a member of Carmignac’s investment committee, citing the risk of blocked manufacturing supply chains exacerbating inflationary pressures from Russia’s invasion of China. Ukraine, which boosted fuel and Food prices.
But the Chinese authorities, having allowed the country’s tightly controlled currency to weaken, would also reduce the cost of importing goods from the global workshop, which “could be deflationary”, Majoros said.
The European Stoxx 600 stock index closed up 0.7%. Exporters were helped by a weaker euro, which hit a new five-year low against the dollar at $1.0515, on bets of aggressive interest rate hikes in the United States.