A rally of US tech stocks is set to reverse itself on Friday, as investors bet on Amazon's surprisingly negative comment about the rapid decline in AWS sales in April. They also bet on the possibility of further interest rate hikes, increased inflation, signs that the economy was slowing down, etc. By 730 am, contracts on the Nasdaq 100 had fallen by 0.3%. ET, after the underlying Index soared by 2.8% on its best day since February 2 following positive results from a list of technology heavyweights this week. S&P futures also fell 0.3% after the benchmark index posted its biggest gain since January. Treasuries rose, and gold prices dropped. The oil prices are also expected to finish the week lower. The dollar rose, while bitcoin was flat.
Amazon.com's shares dropped in premarket trade after the ecommerce company's
AWS: A few comments about its AWS
Cloud computing offsets the otherwise positive first-quarter results. The shares had risen as high as 12% during extended trading on Thursday before the comments revealed weakness in Amazon Web Services. This division is its most profitable, and sales growth has slowed down dramatically since April. Cloud stocks fell in sympathy amid fears that technology demand is slowing. Microsoft (MSFT US), Snowflake(SNOW US), Datadog (DDOG US), -3%.
Intel Corp. surged after the chipmaker announced first-quarter results. It also projected that free cash flow would return in the second half.
Here are some of the biggest premarket moves:
Amazon.com's shares fell 1% before the opening bell on Friday after cautious remarks by the company about its cloud computing division offset otherwise positive first-quarter earnings. Stocks surged up to 12% during extended trading on Thursday before turning around after comments that highlighted weakness in Amazon Web Services.
Intel shares rose 4% before the opening bell on Monday after the chipmaker announced its first-quarter results. The company also projected that it would return to a free cash flow situation in the second half. Analysts said that the worst may be over for struggling chipmaker. Some analysts even suggested that its revenue might have reached a bottom.
Snap's premarket trading fell by 19% after the company reported revenue for the quarter that was below the analyst average estimate. Analysts have noted that the outlook has been weakened for the stock as the social media company continues to adjust its platform to a difficult macro-environment.
Analysts pointed out that Cloudflare was forced to reduce guidance after the SVB collapse, and subsequent banking crisis.
Pinterest's premarket share price fell 13% after it issued a weak forecast. Analysts noted that macroeconomic conditions remain difficult, but some analysts were optimistic about the firm's ability to grow its margins in 2018.
The shares of Top Financial, a Hong Kong-based online brokerage company listed in the US (TOP US), have increased six-fold during premarket trading. As of 4:42 am in New York, more than 150,000 shares had been traded.
First Solar's shares fell 9% on the US premarket, their worst day since 2022. The solar module maker disappointed analysts with its first quarter sales, and analysts pointed to a slowing momentum in bookings. Brokers noted that First Solar reiterated its forecasts for the year and expressed hope it would be able meet them.
Amgen's stock fell in the postmarket after analysts pointed out that Enbrel and Otezla revenues missed estimates for the first quarter. The company raised its adjusted earnings-per-share forecast for the entire year.
Capital One's shares fell in the postmarket after the company reported that its adjusted earnings per share (EPS) for the first quarter was below analyst estimates. Capital One reported that total deposits for the quarter surpassed analyst estimates.
Alteryx fell in extended trading Thursday after the software firm gave a weaker-than-expected forecast for its second quarter.
The quarterly reporting season is better than most - including Mike Wilson – expected. However, US stocks are struggling to continue their first-quarter rally due to fears of a recession.
Michael Hewson is the chief market strategist at CMC Markets. He said that the surprise strength of the first-quarter earnings in the technology sector came against "very low expectations." He said that when the penny drops about the expected weakness in consumer demand, the gains made this week could start to lose steam.
Today, the focus will be on core PCE deflator -- the Fed's preferred gauge of inflation. Bloomberg Economics predicts that core services inflation will increase in March compared to the previous month.
Michael Hartnett, a strategist at Bank of America Corp., said that he believes a decline in earnings and an easing labor market will further derail the equity rally. The strategist, citing data provided by EPFR Global in a note, said that US stock funds experienced outflows of $2.7 billion for the second consecutive week.
The markets remain on edge as the data showing an unexpected increase in US inflation pressures has reinforced expectations for a Federal Reserve rate hike in next week and possibly June. The recovery in France, and the outperformance of forecasts in Spain, have given Europeans hope that they can avoid a recession. However, an increase in consumer prices suggests more rate hikes by the European Central Bank.
After digesting a slew of regional growth and inflation data, traders in Europe increased their bets that the ECB will slow to a 25bps hike next week. The euro area economy grew less than expected after German economic growth stagnated. Regional CPI prints in the bloc's biggest economy indicate that the national print is likely to slow later today.
The Stoxx 600 Index is also down by 0.2%, and utilities and travel are among the worst performers. But it was the banks who were the worst performing sector in Europe on Friday. The Stoxx 600 Index fell by 0.2%, but the Stoxx 600 Banks Index dropped 1.7%. Sabadell, CaixaBank, FinecoBank, Banco BPM, and CaixaBank were the worst performing Spanish and Italian banks. NatWest dropped 5.6% as a missed net interest income, and a softer outlook on deposit growth offset the UK lender's profit. The most significant European movers are:
Electrolux's 1Q results were better than expected, allowing for an upgrade in estimates.
Numis shares rose up to 68%, to 343p, after Deutsche Bank agreed in a PS410-million deal to purchase the City household name boutique investment bank.
SCA shares rise as high as 8.5% following the Swedish forestry company's first quarter earnings that blew past expectations.
Analysts say that the new business update of Prudential looks solid, and shows encouraging recovery in Hong Kong and Indonesia.
Hikma Pharmaceuticals gains as much as 4,9% following a trading update from the UK company that raised guidance on its generic drugs. Barclays believes the upgrade will be well received by the market
Covestro's shares surged by up to 6.3% following the announcement of better-than expected 2Q Ebitda, and the resumption of buybacks.
Kingspan shares rise as much as 6.2% following the Irish insulation and construction products maker's announcement that it expects a first-half profit of over EUR400m, and plans to delist the LSE.
SBB shares fell as much as 14 percent after the Swedish landlord announced a loss pre-tax of SEK4 billion for 1Q, and plans to raise SEK2.6billion in new class D share.
After the distiller announced quarterly earnings and an outlook Citi called "very concerning", Remy Cointreau fell as much as 9.5%. This is the biggest drop since March 2020's Covid market crash.
NatWest's shares fell as much as 7.1% following a miss on net interest income and softer guidance for deposit growth. This offset a profit that was surpassed by the UK lender. Analysts have also pointed out the lack of an upgrade to guidance
Unicaja's shares dropped up to 10% after it reported a net loss for the first three months that was below the average analyst's estimate. Morgan Stanley called these results 'disappointing.'
ING Financial Markets' Padhraic G Garvey is the head of global rates and debt strategy. He wrote: 'What appears to be sticky contemporaneous price inflation remains a concern, preventing markets from getting carried away with the rate-cutting phases that will come in the following quarters.
Early in the session, Asian shares advanced, helping to pare their monthly loss as strong corporate earnings increased optimism for a recovery of global economy. Japanese stocks extended their gains following the Bank of Japan's policy meeting. (See below for more information). The MSCI Asia Pacific Index climbed up to 0.8%, before reversing over half of these gains. TSMC and Samsung were the main drivers after tech earnings boosted Wall Street overnight. The markets in the region were mostly higher with benchmarks from Japan, Hong Kong and Taiwan being among the most successful.
In its first decision as Governor Kazuo Umeda, the Bank of Japan maintained policies, including stimulative measures. The Topix closed at 2,057.48, up 1.2%. The Nikkei gained 1.4%, closing at 28,856.44, the highest since August 19. The yen fell 0.8%, to about 135 dollars. The BOJ canceled its guidance for future interest rates and called for an in-depth review of its policies. The central bank has also dropped the reference to Covid-19 in its guidance and its expectation that rates will remain at current levels or lower. Rina Oshimo is a senior strategist with Okasan Securities. She said that this decision indicates a'maintenance of status quo'. Investors are focusing on corporate earnings and it's difficult to make aggressive moves before the FOMC meeting and other important events, such as the holidays in the U.S.
Chinese stocks rose as top leaders reaffirmed their support for the country's economy while warning of an insufficient domestic demand. The main Asian stock index is still on track for a loss of 1% per month in April. The index is down about 6% since its high in late January amid a crash on the Chinese equity market.
Australian stocks rose, as the S&P/ASX 200 Index closed at 7,309.20, up 0.2%, thanks to mining and bank shares. This comes after Wall Street stocks were boosted by technology earnings. The Australian benchmark index, however, fell 0.3% for the week. This was the second consecutive weekly loss. The index has seen its highest monthly gain since January. The S&P/NZX 50 Index rose 0.9% in New Zealand to 12,019.84
Indian stocks outperformed Asian peers in the month of March, thanks to strong foreign inflows as well as earnings that continue to meet expectations. S&P BSE Sensex increased 0.8% to 61.111.244 in Mumbai on Friday, while NSE Nifty 50 Index also rose by the same amount. The BSE-Sensex and Nifty 50 Indexes rose 4.1% and 3.6% respectively for the month. Shares of auto, banks, and metal companies were the top gainers. This month, the MSCI Asia-Pacific Index fell by 1.1%. Dharmesh Shah, ICICI Securities, said in a Friday note that 'our bottom-up model supported by the market internals suggest further legs in this ongoing rally'. The Adani Group's stocks surged sharply ahead of Wednesday's submission of the Indian capital market regulator report to a Supreme Court appointed panel. Adani Ports and Adani Enterprises, the group's flagships, both rose 3.9%. Reliance Industries, which increased by 1.8%, contributed the most to Sensex's gains. Of the 30 shares that make up the Sensex, 24 rose in value and six fell.
The Bloomberg US Dollar Index advanced 0.5% Friday against all of its peers, sending the Bloomberg Dollar Spot Index to its largest weekly advance since March, and its second successive weekly gain for first time since February, as the Japanese yen plunges following the Bank of Japan's policy decision that scrapped its existing rate guidance. After the BOJ stayed with stimulus and disappointed those who thought Japan would ever be able normalize, USD/JPY rose as much as 1.7%, to 136.18. The euro zone avoided a winter slump by growing in 2023, even though inflation remains a threat. Bloomberg's survey of analysts showed that the 20-nation economic growth was only 0.1%, which is below the median estimate of 0.2%. The German GDP Chain Linked GDP also contracted. Traders increased their bets that the ECB would slow down to a rate hike of 25 basis points in May.
Rates rose as traders priced in some ECB premium following a raft growth and inflation data from the region. The US session includes data such as the PCE deflator and employment cost index. US yields have risen by almost 5bps across intermediates, with 10-year yields at around 3.48%. Bunds are lagging by about 3bp. The US 2s10s Spread is flat by more than 1bp today with the front-end trailing gains further down the curve. German two-year rates are down 9bps, at 2.74%. US two-year rates have dropped 4bps to 4.03%.
WTI is trading at around $74.80. Gold spot falls by 0.2%, to $1,983.
Bitcoin is now further from the USD 30k level after failing to challenge it in either Thursday's or overnight session.
On the calendar for today, at 8:30 am, we will have important PCE data, along with personal income numbers for March, which will show wage growth. We'll receive the latest University of Michigan Consumer Sentiment gauge reading at 10 a.m. Chevron will be reporting earnings, as well as Exxon Mobil, Colgate-Palmolive Aon and PetroChina.
US Market Snapshot
S&P futures are down 0.4% at 4,137.25
STOXX Europe600 down 0.3% at 462.57
MXAP increased by 0.2% to 160.26
MXAPJ increases by 0.3% to 513.43
Nikkei up 1.4% to 28,856.44
Topix increases 1.2% to 2050.748
Hang Seng Index rises 0.3% to 19,894.57
Shanghai Composite rose 1.1% to 3323.28
Sensex rises 0.3% to 60.841.97
Australia S&P/ASX200 up 0.2% at 7,309.15
Kospi increases by 0.2% to 2,501.53
German 10-Year yield remains unchanged at 2.36%
The euro is down by 0.4% at $1.0983
Brent Futures Down 0.4% at $78.05/bbl
Gold spot drops 0.3% to $1.982.30
U.S. Dollar Index rises 0.50% to 102.01
Top Overnight News
In Kazuo Ueda’s first meeting as BOJ governor, the BOJ scrapped a major part of its interest rate forward guidance. This is a first step in unwinding Japan's ultra-loose policy. The yen dropped sharply as the 71 year old economist, Kazuo Ueda, played it safe in his debut. He announced a comprehensive review the BoJ policies and held off on revising the longstanding yield-curve control measures. FT