Strong tech earnings to offset renewed bank worries

Mixed earnings reports from several companies helped drag major US indices lower Tuesday, with the broad S&P 500 Index and tech-focused Nasdaq Composite ending at or near their lowest levels in a month.  Tech shares struggled as investors prepared for mega-cap companies Microsoft and Alphabet which reported after Tuesday’s close, while banks took a hit after a sharp drop in customer deposits at First Republic Bank renewed worries over the stability of regional lenders.  Elsewhere, European equity markets also ended the session in the red, dragged lower by basic materials, financials and energy sectors.   

Summary as at 25.04.2023 

• Most Asian equities fell this morning amid persistent fears of an economic slowdown this year, although technology-heavy indices were aided by consensus-beating results from major US firms. 
• European shares are headed for declines on rekindled US banking worries although these may be partly cushioned by a rebound in US equity futures following the upbeat earnings results from mega-cap tech names. 
• Oil prices moved higher on Wednesday after losing more than 2% in the previous session, weighed down by concerns about slowing global economic growth and tightening financial conditions that could hurt energy demand.  Meanwhile, an industry report showed that US crude inventories dropped by more than 6 million barrels last week, exceeding expectations for a 1.7-million-barrel decline. 

• The annual inflation rate in Australia dropped to 7.0% in Q1 from an over-30-year high of 7.8% in Q4, compared with market forecasts of 6.9%.  This was the lowest print since Q2 2022, with food prices rising the least in 3 quarters.   
• US President Joe Biden launched his re-election bid on Tuesday with a promise to protect American liberties from extremists linked to former President Donald Trump who he beat in 2020 and might face gain in 2024. 
• First Republic Bank is exploring divesting $50 billion to $100 billion of assets as the beleaguered lender attempts to rescue itself from the turmoil that engulfed the industry last month.  The sales, which include long-dated mortgages and securities, are aimed at reducing the mismatch between the bank’s assets and liabilities – one of the factors that have left the First Republic teetering after a run on deposits in March. 
• Microsoft Corp beat Wall Street estimates for third-quarter revenue on Tuesday, driven by growth in its cloud computing and Office productivity software businesses.  The company’s revenue rose 7% to $52.9 billion in the quarter ended March, inching past the average analyst estimate of $51.02 billion.  Shares rallied by 8.5% in extended trading on Tuesday night. 
• Google-parent Alphabet Inc’s first-quarter revenue exceeded market expectations after yesterday’s market close, boosted by an uptick in advertising and steady demand for its cloud business.  Revenue for the first quarter stood at $69.79 billion, compared with estimates of $68.95 billion. 

• UPS reported adjusted earnings per share of $2.20 per share yesterday, about 1 cent under expectations, and revenue of $22.93 billion, also slightly shy of expectations.  Shares dropped some 10% following the results to near a two-month low. 
• Verizon shares rose modestly even after the wireless company reported lower-than-expected earnings of $1.17 per share and weakness in its consumer business. 
• McDonald’s reported $2.63 in adjusted earnings per share, about 30 cents above expectations, on $5.9 billion in revenue.  Comparable store sales grew 12.6% through a combination of price hikes and higher volume.  McDonald’s shares still fell nearly 1%. 
• PepsiCo’s shares jumped over 2% after the beverage company said it earned $1.50 er share in the first quarter, about 11 cents above expectations, on revenue of $17.85 billion, also exceeding forecasts. 
• General Electric reported double-digit year-over-year growth in orders, revenue, and operating profit, citing strength in the company’s renewable energy businesses.  Its shares were down more than 1.7%. 

• General Motors reported first-quarter sales of $40 billion, about $1.4 billion above expectations, and said its earnings guidance.  The company was second behind Tesla in quarterly electric vehicle deliveries.  Its shares were down about 4%.