Alphabet Soars, Microsoft Dips: Earnings Meet Volatile Market and Fed's Call

Large US companies release their latest quarterly earnings report for the past quarter, mainly showing positive earnings and revenue. However, volatility in this morning’s Asian session remains limited as investors await the Fed’s rate decision. In addition to this, as a rate hike is almost inevitable and priced in the market, investors will be more interested to hear the Fed’s guidance. For example, will another interest rate follow this year and will the Fed cut rates in 2024?

US and Asian equities are trading slightly higher in response to the latest earnings data. However, European stocks are experiencing a significant decline. Analysts say European investors sell shares and look to reduce risk ahead of rate decisions scheduled over the next week. According to experts, European markets are expected to experience further pressure in the longer term as economic data deteriorates. Experts believe the German economy is under pressure from the Russian-Ukrainian crisis and a weak economic recovery in China. 

The German IFO July data on the Business Climate is the latest to disappoint after poor PMI data. The IFO Business Climate Index fell from 88.6 to 87.3 instead of the expected 88.0. The index is now at its lowest point since last November. A further interest rate hike and hawkish comments from the European Central Bank can further pressure European equities such as the DAX and French CAC. European equities are also under pressure from the high recession risk. However, investors will scrutinise the ECB’s economic performance comments. 

German DAX 15-Minute Chart on July 26th

NASDAQ - Alphabet Stocks Soars, Microsoft Dips

Earnings data from large tech companies will influence the NASDAQ more than any other US index due to the weight pricing method. The NASDAQ will be primarily influenced by Microsoft, Alphabet (Google) earnings data and Visa. However, investors should note that Meta (Facebook) will release their quarterly earnings after the market closes tonight. During yesterday’s trading sessions, the NASDAQ rose by 1.13% before retracing towards the end of the trading session. The NASDAQ ended the day 0.43% after a strong retracement, likely due to caution ahead of tonight’s interest rate decision. 

Alphabet was the best-performing stock after the company’s quarterly earnings data. Alphabet’s earnings read 7.29% higher than expectations, and Revenue read 2.50% higher. It is also worth noting that earnings and revenue were higher than the previous quarter’s performance. As a result, Alphabet stocks rose by 6.09% after trading hours. Visa’s earnings data was also better than expected due to global consumers using more credit and bank cards than cash. However, the stock has not yet seen a surge in buyers like Alphabet. 

Though, the main concern for investors is the decline in the price of Microsoft. It should be noted that Microsoft is the most influential stock for the NASDAQ alongside Apple.  Microsoft performed better than expected in terms of earnings and revenue. Earnings read 5% higher and Revenue 1% higher. Both sets of data were also higher than the previous quarter. However, the stock was lower after the report because the board’s guidance was lower than analysts’ expectations. 

Investors will continue to monitor the performance of the ten stocks holding the highest weight within the NASDAQ. In addition to this, investors will also primarily focus their analysis on Alphabet, Visa, Microsoft and Meta due to earnings data and high volume. Nonetheless, one of the key price drivers is likely to be any forward guidance the Federal Reserve provides. If the Fed indicate they still believe the Federal Fund Rate will rise to 5.60-5.75%, the stock market can experience a significant decline. However, if the Federal Open Market Committee signals a pause and a pivot in 2024, the NASDAQ may continue its upward momentum as long as earnings continue to point higher. 

NASDAQ 30-Minute Chart on July 26th

Summary:

• Earnings are higher than expectations, but the stock market remains uncertain due to the upcoming Fed rate decision. 
• European Stock decline during this morning’s Asian and European trading sessions. 
• The IFO Business Climate Index fell from 88.6 to 87.3 instead of the expected 88.0. The index is now at its lowest point since last November.
• Alphabet was the best-performing stock after the company’s quarterly earnings data. Alphabet’s earnings read 7.29% higher than expectations, and Revenue read 2.50% higher. 
• Microsoft also witnesses higher earnings and revenue, but guidance from the board pressures the stock.