Nasdaq Closes Sharply Lower on Disappointing Big-Tech Earnings

What you need to know…

The S&P 500 Index ($SPX) (SPY) on Wednesday closed down -0.74%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.01%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -2.26%.

Stocks on Wednesday settled mostly lower, with the Dow Jones Industrials posting a 6-week high and eking out a slight gain but with a slump in technology stocks weighing on the S&P 500 and Nasdaq 100. 

Alphabet fell more than -9% after reporting Q3 Google advertising revenue of $54.48 billion, weaker than the consensus of $56.98 billion.  Also, Microsoft fell more than -7% after saying it expects weak PC and ad demand to continue in Q2. 

Chip stocks also retreated Wednesday after Texas Instruments forecasted Q4 revenue of $4.40 billion-$4.80 billion, below the consensus of $4.93 billion.

On the positive side for stocks, shares of Visa rallied more than +4% Wednesday to lift the Dow Jones Industrials into positive territory after reporting stronger-than-expected quarterly earnings and boosting its quarterly dividend. Also, shares of Universal Health Services surged +13% after reporting better-than-expected Q3 earnings results. In addition, a decline in T-note yields was supportive for stocks as the 10-year T-note yield Wednesday fell to a 1-week low of 3.990%.

Wednesday’s U.S. economic news was mixed for stocks.  Sep wholesale inventories rose +0.8% m/m, weaker than expectations of +1.0% m/m.  Also, Sep retail inventories rose +0.4% m/m, weaker than expectations of +1.2% m/m.  Still, the rise in inventories is negative for the economy since it suggests weak demand and excess production.  Sep new home sales fell -10.9% m/m to 603,000, although that was stronger than expectations of 580,000.

Today’s stock movers…

Assurant (AIZ) closed down more than -10% Wednesday to lead losers in the S&P 500 after reporting preliminary Q3 adjusted Ebitda of $116 million, well below the consensus of $271.6 million. 

Alphabet (GOOGL) closed down more than -9% Wednesday to lead losers in the Nasdaq 100 after reporting Q3 Google advertising revenue of $54.48 billion, weaker than the consensus of $56.98 billion.  Other mega-cap tech stocks also sold off, with Meta Platforms (META) closing down more than -5% and

Amazon.com (AMZN) closed down more than -3%. 

Microsoft (MSFT) closed down more than -6% today to lead losers in the Dow Jones Industrials after saying it expects weak PC and ad demand to continue in Q2 and said that Q2 dollar strength cut sales growth by -5%.

Boeing (BA) closed down more than -8% to lead losers in the Dow Jones Industrials after reporting Q3 revenue of $16.00 billion, weaker than the consensus of $17.74 billion, and cutting the delivery forecast of its 737 jets this year to 375 from a July forecast of the “low 400s.” 

Chip stocks fell Wednesday after Texas Instruments forecasted Q4 revenue of $4.40 billion-$4.80 billion, below the consensus of $4.93 billion.  Marvell Technology (MRVL) closed down more than -4%.

Also, Analog Devices (ADI) closed down by more than -3%.  In addition, Nvidia (NVDA), Advanced Micro Devices (AMD), Texas Instruments (TXN), and Microchip Technology (MCHP) closed down more than -2%.

Seagate Technology Holding Plc (STX) closed down more than -7% Wednesday after forecasting Q2 revenue of $1.70 billion-$2.00 billion, weaker than the consensus of $2.22 billion, and said it would reduce its employees by about 3,000 as part of a restructuring plan. 

F5 Inc (FFIV) closed down more than -7% Wednesday after forecasting Q1 adjusted EPS of $2.25-$2.37, below the consensus of $2.59. 

Universal Health Services (UHS) closed up more than +13% Wednesday to lead gainers in the S&P 500 after reporting Q3 adjusted EPS of $2.54, stronger than the consensus of $2.38.   

Visa (V) closed up more than +4% Wednesday to lead gainers in the Dow Jones Industrials after reporting Q4 adjusted EPS of $1.93, better than the consensus of $1.86, and then boosted its quarterly dividend to 45 cents a share from 37.5 cents, above the consensus of 42.5 cents. 

U.S.-listed Chinese stocks rallied Wednesday after the People’s Bank of China (PBOC) and the State Administration of Foreign Exchange said they would enhance coordination with other agencies to ensure the soundness of the equity, bond, and real estate markets.  Pinduoduo (PDD) closed up more than +11 to lead gainers in the Nasdaq 100.  Alibaba Group Holding (BABA) and JD.com (JD) closed up more than +8%.  Baidu (BIDU) closed up more than +3%, and NetEase (NTES) closed up more than +2%. 

Across the markets…

Dec 10-year T-notes (ZNZ22) on Wednesday closed up +17 ticks, and the 10-year T-note yield fell -7.2 bp to 4.030%.  Dec T-note prices Wednesday climbed to a 1-week high, and the 10-year T-note yield fell to a 1-week low of 3.990%.  A rally in European government bonds Wednesday provided carry-over support to T-note prices.  The 10-year UK gilt yield fell to a 1-month low of 3.555%, and the 10-year German bund yield dropped to a 2-1/2 week low of 2.111%.  A selloff in stocks Wednesday also boosted the safe-haven demand for T-notes.

T-notes maintained moderate gains Tuesday afternoon on strong demand for the Treasury’s $43 billion auction of 5-year T-notes that had a 2.48 bid-to-cover ratio, above the 2.41 average of the last ten auctions. 

• Large Numbers of Alphabet Call and Put Options Trade Hands After Results
• Above-Consensus Earnings from Mega-Cap Tech No Longer a Sure Thing
• Mega-Cap Tech Stocks Drag Nasdaq Lower
• Markets Today: Stocks Mixed as Alphabet and Microsoft Earnings Disappoint