Nasdaq climbs as investors cheer Microsoft, Alphabet results

Same pattern as yesterday with lots of up and down action until noon when all the indexes went deeply south, the Dow down 228 points.  The Nasdaq ended modestly in the black but was up 165 at noon.  It was the Transportation sector that came in weak as it’s tied to overall fears of general economic weakness and only strong results from Microsoft and Google boosted the tech sector.  None of it makes a lot of sense since Q1 has been going much better than expected, so much so that yesterday’s forecast of a 3.9% contraction was today changed to a 3.2%.  

Nearly one-third of the S&P has reported with nearly 80% beating estimates. But it’s not enough. Investors want to see more companies bringing in the good news before changing course and more companies are coming in the next two days.  There is also the anxiety that the cost of insuring U.S. debt has risen to its highest in 13 years, all due to political rhetoric over not raising the debt ceiling.  (Are there actually insurance companies out there that are capable of covering the U.S. debt?)  Volume was again a little above average at about 11 billion. 

Wed April 26, 2023  4:41 PM

Nasdaq climbs as investors cheer Microsoft, Alphabet results

By Sinéad Carew, Ankika Biswas and Sruthi Shankar

DJ: 33,530.83  -344.57        NAS: 11,799.16  -238.05        S&P: 4,071.63  -65.41      4/25

DJ: 33,301.87  -228.96        NAS: 11,854.35  +55.19         S&P: 4,055.99  -15.64      4/26

April 26 (Reuters) - The tech-heavy Nasdaq outperformed Wall Street's other major indexes on Wednesday after strong Microsoft Corp (MSFT.O) results boosted the technology sector but gains pared as the session wore on due to lingering concerns about a weakening U.S. economy and the banking sector.  The S&P 500 and the Dow ended lower, dragged down by economically sensitive transport stocks due to ongoing recession fears. Bank stocks were also under pressure as regional bank First Republic hit a record low. Investors have been jittery about the sector since the recent failure of two U.S. banks.  Still, Microsoft shares rallied following upbeat quarterly earnings and sales, including of robust artificial intelligence products. Its results boosted shares in companies such as cloud computing rival Amazon.com Inc (AMZN.O), data analytics company Datadog (DDOG.O) and data cloud giant Snowflake Inc (SNOW.N).  Alphabet Inc (GOOGL.O) reported better-than-expected first-quarter results and a $70-billion share buyback plan.

"The market is looking for direction on where the economy and companies are headed. We've had some good earnings reports come out but investors are realizing its not sufficient to clarify the path forward," said Lisa Erickson, head of public markets at U.S. Bank Wealth Management in Minneapolis.  Investors are waiting for more earnings reports and a key inflation reading on Friday as well as the Federal Reserve meeting next week, Erickson said.

The Dow Jones Industrial Average (.DJI) fell 228.96 points, or 0.68%, to 33,301.87; and the S&P 500 (.SPX) lost 15.64 points, or 0.38%, at 4,055.99. The Nasdaq Composite index (.IXIC) closed up 0.47%, or 55.19 points, at 11,854.35, according to Nasdaq.com.  However, the economically sensitive Dow Transports average (.DJT) tumbled for a second straight day after Wednesday's weaker-than-expected capital goods data and Tuesday's weak United Parcel Service (UPS.N) results.

New orders for key U.S.-manufactured capital goods fell more than expected in March and shipments declined, suggesting that business spending on equipment likely remained a drag on first-quarter economic growth.  Still, earnings forecasts looked way more optimistic after Tuesday evening's bullish reports, with analysts now expecting a 3.2% contraction in first-quarter profit for S&P 500 companies compared with expectations for a 3.9% decline just a day ago.

Of the 163 S&P 500 companies that reported first-quarter profit through Wednesday, 79.8% topped analysts' expectations, as per Refinitiv IBES data. In a typical quarter, 66% companies beat estimates.  "There had been a greater concern that the economy was going to slow down to a more significant extent and so far first-quarter earnings are bucking that trend and looking much stronger than anticipated," said Greg Bassuk, chief executive at AXS Investments.

However, regional lender First Republic Bank's (FRC.N) shares sank, hitting a fresh record low for the second day in a row, after a report that the U.S. government was unwilling to engineer its rescue, after the lender reported plunging deposits earlier this week.  U.S. bank regulators were weighing the prospect of downgrading their private assessments of First Republic, which could curb its borrowing from the Fed, Bloomberg News reported on Wednesday afternoon.  Shares of PacWest Bancorp (PACW.O), another regional bank, rallied as it beat estimates for first-quarter profit and stabilized deposit outflows.  Meta Platforms Inc (META.O) is scheduled to report results after the market close.

Investors are awaiting the Fed's monetary policy decision on May 3 for clues on policymakers' next steps regarding interest rates.  Traders have priced in a 79% chance of the U.S. central bank hiking rates by 25 basis points next week, as per CMEGroup's Fedwatch tool, with most expecting the Fed to hold rates before starting to cut them later this year.  Reflecting mounting anxiety among investors, the cost of insuring exposure to U.S. sovereign debt rose to its highest since 2011, driven up by unease that the government could hit its debt ceiling sooner than expected.

Activision Blizzard (ATVI.O) tumbled after UK's competition regulator prevented its takeover by Microsoft on antitrust concerns. 

Declining issues outnumbered advancers on the NYSE by a 2.07-to-1 ratio. The S&P 500 posted five new 52-week highs and 11 new lows.

On U.S. exchanges 11.06 billion shares changed hands compared with the 10.4 billion average for the last 20 sessions.