A look at Microsoft’s results tell an investor that business-to-business spending might be picking back up and declines in cloud spending have bottomed. A peak at Google’s release tell that investor the opposite.
“There’s real dispersion,” BlackRock’s Global CIO Rick Rieder said referencing Microsoft and Alphabet earnings. “We’re getting a series of conflicting signs around market. That’s why markets are so jumpy, so uncertain.”
The signs Rieder refers to have been building in both directions over the past month as debate over what’s next for the Federal Reserve in its fight to bring inflation down has hung over markets.
“There’s good news in that there’s been an uncertainty lifted” Brown told Yahoo Finance Live. “On the other hand it might be replaced by a different uncertainty about whether the government is going to shut down and really what’s going to happen with spending.”
Others are more market centric stories. There have been hints that the financial tightening caused by the Fed’s aggressive interest rate hiking campaign could suffocate what’s been an otherwise resilient economy. And some have still called for more rate hikes as inflation’s path downward has begun to slow.
In sum, this leaves markets in a “spooky place,” according to RBC Capital Markets’ head of US equity strategy Lori Calvasina.
“Though upside risks remain, downside risks have grown, the outlook has become cloudier and we don’t think the pause in the S&P 500 rally that we called for in early August is done yet,” Calvasina wrote in a note on Monday.
She maintains a 4,250 call on the S&P 500, which would be about 1.5% higherfrom Wednesday’s close.
An earnings ‘famine’
Market strategists had hoped that earnings would be the catalyst to pull stocks out of their recent bond-drive rut. But, that has not been the case.
Evercore ISI’s Julian Emmanuel described the current earnings season as “a relative famine for positive earnings announcement price reactions,” in a research note on Wednesday note.
After 128 S&P 500 companies had reported entering Wednesday’s trading session, companies who beat expectations for both earnings per share and revenue have seen their stock rise 0.3% the next day. Over the past five years those companies sawa 1% move higher on average.
Misses are hurting more too. Companies that miss on both the top and bottom line are seeing their stocks fall nearly 5% the next day. Over the past five years, that move has been closer to 3.1% on average.
At this point its well documented that the stock market rally from this year was largely driven by the ‘Magnificent 7.‘ Combined, the stocks have the market caps to move markets.
But when stocks have needed a push the mega caps have had been like everything else in markets: Mixed. Microsoft, and Meta rose following their reports. Alphabet and Tesla slumped, leaving markets, still, with no clear direction.