ASX set for gains as Wall Street rises; Alphabet shines, Microsoft disappoints
Newly revised on the 26th of July, 2023 at 7:23 in the morning.
The stock market on Wall Street gained momentum after several companies announced higher-than-anticipated profits. However, tech powerhouses Alphabet and Microsoft unveiled conflicting results after the market closed.
The S&P 500 went up by 0.3 percent, reaching its highest closing point since the beginning of April 2022. The Dow Jones increased by 0.1 percent, while the Nasdaq composite experienced a 0.6 percent rise. The Australian sharemarket is expected to go up as well, as futures at 6.59am AEST indicate a jump of 18 points or 0.2 percent at the opening. On Tuesday, the ASX saw a 0.5 percent increase.
The stock market is once again showing positive growth on Wall Street. Photo by Bloomberg.
Google rebounded from an unexpected dip in advertising revenue during its most recent quarter, indicating a revival in the growth cycle necessary to support investments in artificial intelligence technology, which is anticipated to revolutionize the competitive environment.
The corporation announced a gain of $US18.4 billion ($27.1 billion), or $US1.44 per share, marking a growth of 15% compared to the previous year. These figures also surpassed the forecasts made by analysts, which greatly influence investors.
The value of Alphabet's stocks experienced a significant increase of almost 8 percent during trading hours conducted after the release of the results.
Microsoft announced disappointing sales growth in the fourth quarter due to a slowdown in the demand for cloud-computing services. Meanwhile, the company anticipates a boost in revenue with the introduction of new products powered by artificial intelligence.
The software company announced on Tuesday that they had made a profit of $US2.69 per share in the June 30 quarter, with a sales increase of 8 percent amounting to $US56.2 billion. Following this announcement, their shares experienced a 1.5 percent decline during after-hours trading.
General Electric took a leading position in the market by experiencing a significant 6.3 percent surge. This positive outcome was the result of the company's ability to surpass the profit expectations set by analysts for the most recent quarter. Moreover, General Electric also elevated its predictions for both annual revenue and profits, demonstrating further progress in its overall performance.
3M, a large industrial company, experienced a 5.3% increase in its stock price. This was due to the company's optimistic projection of higher profits for the entire year, which was achieved partly through implementing measures to reduce costs. PulteGroup, a home building company, also saw positive growth with a 6.2% rise in its stock price. This was a result of the company performing better than anticipated in terms of profit during the spring season.
Airline stocks, spearheaded by Alaska Air Group, experienced a downturn on Wall Street. Despite surpassing profit and revenue expectations for the latest quarter, Alaska Air Group's stock plummeted by 9.7%. Analysts speculated that investors may have been dissatisfied with the company's financial projections for the ongoing quarter.
Google's parent company, Alphabet, experienced a significant surge in stock price during after-hours trading.
Raytheon Technologies experienced a significant drop of 10.2 percent after announcing that it is necessary to expedite the process of removing and inspecting certain Pratt & Whitney aircraft engines to identify a rare condition in powder metal. As a result, the company revised its projected cash generation for this year, but it also reported higher profits for the spring season, surpassing analysts' expectations.
Snap expects to generate less revenue in the current quarter than what analysts had predicted. This indicates that the advancements in the digital advertising sector are not yielding results as quickly as initially anticipated. As a result, the company's stocks dropped by 19% during after-hours trading.
This week is filled with a lot of earnings reports, and about 30 percent of the companies in the S&P 500 have their reports planned. Most of them have been surpassing what analysts predicted, which is typically what happens during this reporting period.
UPS, on the other hand, fluctuated between acquiring and losing value after reaching a preliminary agreement with 340,000 laborers who are members of a union, in order to increase wages. This agreement has the potential to prevent a strike from occurring. At the end of the day, UPS experienced a decrease of 1.9 percent in its overall performance.
This week's alternative focal point for Wall Street also commenced on Tuesday: the Federal Reserve's most recent gathering on interest rates.
Many anticipate that the Federal Reserve will announce a further rise in interest rates this Wednesday. This action is aimed at tackling the issue of inflated prices. If implemented, the federal funds rate would reach a level between 5.25 percent and 5.50 percent—a peak not seen in the past 20 years. This increase would be a significant jump from the almost non-existent interest rates of early last year.
Elevated rates exert pressure on inflation by decelerating the overall economy and adversely impacting prices of shares and alternative investments. Traders are optimistic that the recent action taken on Wednesday will mark the conclusion of this period of rate hikes, as inflation has been moderating since the previous summer.
Expectations of economic growth and the likelihood of evading a prolonged recession have fueled an impressive surge in stock markets this year. The resilience of the job market has played a significant role in sustaining consumer spending and bolstering the overall economy. On Tuesday, a report revealed that consumer confidence in the United States increased beyond the predictions of economists.
However, numerous individuals in the financial sector caution that the Federal Reserve is unlikely to indicate on Wednesday that it has completed its rate hikes. Although inflation has slightly decreased, it remains at a significant level, and if the Federal Reserve hopes to bring inflation back to its desired 2 percent target, the economy might have to endure a lengthy yet mild recession, as noted by Steven Ricchiuto, the Chief Economist for Mizuho Securities in the United States.
In the world of bonds, the returns for Treasurys remained fairly stable.
The 10-year Treasury yield remained steady at 3.88 percent, playing a crucial role in determining interest rates for mortgages and various significant loans.
The interest rate for two-year Treasury bonds, which is influenced by the market's predictions for Federal Reserve actions, decreased to 4.88 percent from 4.92 percent.
In international markets, the stock indices displayed variability.
Shares surged by 4.1 per cent in Hong Kong and 2.1 per cent in Shanghai. Chinese policymakers have made assurances of implementing measures to revive the sluggish economic growth by offering support to real estate sales and other struggling industries. However, they refrained from disclosing any specifics and made no mention of potential expenditure for stimulus purposes.
The performance of indices remained relatively steady across different regions globally.
