Tech giants drive market sentiment
Tech companies’ earnings have been in the spotlight this week, with Alphabet’s strong quarterly results providing a positive tone. Google’s parent company reported better-than-expected profits, driven by strong revenue from its cloud division, sending its stock up more than 5% in after-hours trading. But not all tech stocks were so lucky. AMD’s stock price fell 8% in the pre-market session after the company’s fourth-quarter revenue forecast was lower than expected, which also weighed on the overall semiconductor sector. The divergence highlights the market’s selective reaction to technology earnings, with focus shifting to upcoming reports from Metaplatforms and Microsoft on Wednesday and Apple and Amazon on Thursday.
Dow component weakness
The Dow came under pressure from major components, particularly after Caterpillar reported underwhelming profits and cut its full-year earnings outlook. Shares of the construction equipment giant fell nearly 3% premarket as investors reacted to disappointing third-quarter results. Additionally, shares of pharmaceutical company Eli Lilly fell 7.5% after the company missed analysts’ expectations for both sales and profits, further deteriorating sentiment in the blue-chip index.
Economic indicators vary, increasing uncertainty
Macroeconomic data added further complexity for traders. The US GDP growth rate in the third quarter was lower than expected at an annualized rate of 2.8%, falling short of the expected 3.1%. This slowing growth figure highlights potential economic headwinds. Conversely, the October ADP report showed stronger-than-expected private sector job growth, marking the highest job creation rate in more than a year, suggesting the resilience of the labor market. These mixed signals may reinforce a cautious outlook for economic expansion and affect investors’ expectations about the future direction of Federal Reserve policy.
Market movers: hit or miss returns
Several companies made notable pre-market moves following unexpected earnings results. Notably, Super Micro Computer, which announced the resignation of its auditor amid concerns over governance, fell more than 30%. Meanwhile, logistics company XPO rose 3.9% after reporting better-than-expected third-quarter profits. In the tech industry, Snap soared 10.5% after reporting strong earnings and announcing a $500 million share buyback program, while Alphabet rose nearly 7% on strong cloud revenue growth.
Market Forecast: Cautious optimism on technology, cautious on broader market
Economic indicators are mixed, earnings results are mixed, and investor sentiment appears to be cautious. Alphabet’s strong performance could help the tech sector in the short term, especially if future reports from other big tech companies reflect this positive trend. However, the overall market could be volatile, as GDP numbers and company-specific disappointments like Caterpillar and AMD hint at potential headwinds. While the cautiously bullish outlook for tech stocks may remain, the overall market could remain under pressure unless earnings show stronger resilience.
