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Mundane Monday for Stocks

Stocks were tracking flat to just a little lower in early trading in Europe on Monday whilst US futures were also weaker as investors look ahead to a key earnings week. The FTSE 100 held around the 7,900, not a million miles from the all-time high after a solid run up over the last two weeks that just faltered towards the end of last week. Rates were fairly steady with the US 10yr sitting a little above 3.5% while oil faded towards closing the OPEC+ cuts gap, with WTI (May) testing Friday’s lows under $77.  

Equity and bond markets were pretty flat last week without too much by way of fresh direction from the macro side nor from earnings. Bank earnings were mixed – so far we are not seeing a really strong story emerge. There is not a huge amount on the slate today, so investors’ focus is on what happening over the rest of week.  

Big tech names and a third of the Dow Jones are on the tape in the coming days, whilst there are a couple of significant US data releases likely to move markets. AI will be front, and centre of big tech earnings calls this week. Both Alphabet and Meta are facing tough times in advertising and will be looking for AI to be their bodyguard in the meantime. It will be noteworthy just how much Meta in particular shifts its focus – at least in the short term- from the Metaverse to AI.  


Meta... Better?

Meta (META) delivered a thumping Q4 report that topped estimates and helped lift shares to more than double their Metaverse funk low. Three months ago management said they expects revenue in the first quarter of between $26 billion and $28.5 billion. Update on expenses will be of note - last time out management said they expect total expenses in 2023 will be in the range of $89 billion to $95 billion, lower than its prior outlook of $94 billion to $100 billion for the year. 2023 is its Year of Efficiency...cutting costs is one thing and has clearly made a big difference to the share price but investors will still be focused on softer advertising metrics as both revenues and profits are seen weakening. Re ad spending – PINS and SNAP report next week too, both after META so watch for read across.  


Microsoft Soft

Microsoft (MSFT) was downbeat three months ago as revenue growth decelerated to a 6-year low.  CFO Amy Hood said a slowdown across commercial lines seen in December would continue into 2023. Decelerating growth in the cloud business and corporate software is hardly a surprise, but investors will be keen to see how this plays out longer term and how quickly it can bounce back or whether this is the ‘new normal’. Unlike some others in the space the shares are only around 10% off their all-time high – flight to relative quality has been a factor here.  


Google, Amazon and 3M

Alphabet three months ago reported only the second ever quarterly contraction in advertising sales as advertisers cut spending and competition continues to intensify. Cloud growth at Alphabet remained strong, up 32% to $7.32bn, though this was less than expected. Operating expenses rose 10% to $22.50 billion.  

Amazon also said its cloud business suffered a slowdown. Amazon Web Services sales growth declined to 20% - still healthy by most standards – but down from 40% a year earlier. Overall net sales rose 9% in the final quarter to $142.2bn. The problem for Amazon in the results was that AWS has been the prime driver of profits. Operating margins fell to 1.8% from 2.5% a year before, whilst operating income declined to $.27bn from $3.5bn in the same quarter a year ago.  

3M (MMM)- last earnings the company said it expects challenges in the year ahead, sees organic growth flat at best in a range of –3% to 0%, total sales seen at –2% to –6%. The company saw rapid declines in consumer facing markets in the fourth quarter. Bellwether stock – one to watch.  


Other Economic highlights

US core PCE - 0.3% MoM and 4.5% YoY. A week ago core CPI rose 0.4%. The Fed will hike in May. Blackout period has begun, so we won’t be hearing from FOMC members until May 4th. US GDP advanced reading also out on Thursday, seen at +2% annualised from 2.6% in Q4. This comes ahead of advanced Eurozone GDP figures for the first quarter due Friday alongside German inflation figures.

BoJ- the first Bank of Japan meeting for new governor Kazuo Ueda. Most market watchers expect the BoJ will keep monetary policy unchanged and not seek to venture into discussions about unwinding yield curve control. But it will be interesting to see how Ueda outlines his views on policy and normalisation. Speaking at the IMF and World Bank spring meetings, Ueda said the Bank of Japan would stay the course for now and would not normalise policy quickly. Inflation forecasts will let us know more about what the BoJ plans. Tokyo core inflation is seen cooling.  

SPX – finished flat Friday, confirming bearish MACD crossover 

spx crossover.png


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