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Falling rates continue to fuel Wall Street’s rally, with tech earnings disappointing in extended trading

Alphabet, google

Wall Street extended the winning streak for the third straight day as bond yields fell sharply amid earnings optimism, and faded recession fears. The US 10-year bond yields declined to 4.09% from 4.24% a day ago, while the UK 10-year gilt yield dropped to 3.62% from 3.72%, which helped continue to boost the recent tech-supported comeback in the equity markets. The earnings reports from both Microsoft and Alphabet, however, came as disappointing, both of which shares fell 2% and 6%, respectively, in after-hours trading. The tech-heavy index, Nasdaq futures, also cut early gains in the extended hour. Traders will eye on the rest of the major tech earnings from Meta Platforms, Apple and Amazon on Wednesday and Thursday.

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  • Dow climbed to a 7-week high, while S&P 500 and Nasdaq rose to a 6-week high. 10 out of 11 sectors in the S&P 500 finished higher, with Real Estate and growth stocks leading gains. The Real Estate sector was up 3.86% amid a drop in bond yields. Both Consumer Discretionary and Communication Services rose more than 2%, led by Tesla (+5.3%) and Meta Platforms (+6%). Energy is the only sector that closed in red, down 0.06%.
  • Meta Platforms’ shares jumped 5.7% and Snap surged 17%, suggesting that investors piled into the hardest beaten-up tech shares to seek bargains. Snap recovered most of its loss since last Thursday when the social platform's shares plunged 30% due to a miss on revenue expectations
  • Microsoft’s shares fell 2% in after-hours trading as its Azura cloud revenue came as weaker than expected, which grew 35% year on year vs 36.4% estimated, despite a beat on both EPS and the total revenue. EPS is $2.35 vs $2.30 expected, while revenue is $50.12 billion, vs. $49.61 billion expected.
  • The Google parents company Alphabet’s stocks slumped 6% in after-hours trading due to a miss on both EPS and revenue expectations, with the YouTube advertising revenue declining 2% from a year earlier, suggesting weakened advertising demands may be the same issue of other social media, such as Meta Platforms, which is due for release its earnings tomorrow.
  • UK’s new prime minister, Rishi Sunak, warns of “a profound economic crisis” faced by the country, pledging to “place economic stability and confidence at the heart of the government’s agenda”, which reassured the financial market confidence after the bond rout that was caused by the previous PM, Liz Tuss' tax-cutting plan. The British Pound gained 1.7% against the US dollar.
  • US dollar retreated sharply due to a slump in the US bond yields. The pullback of the USD boosted all the other major currencies to strongly rebound, with the Australian dollar and the New Zealand dollar both up more than 1% against the greenback. USD/JPY also pulled back to just under 148. And the Chinese Yuan bounced off the day-low against the USD, with USD/CNH coming off the day-high of 7.3777 to 7.3154 at AEST 8 am.
  • Asian markets are set to open higher following Wall Street’s third straight-day rally. ASX futures were up 0.82%. Nikkei 225 futures rose 0.84% and Hang Seng Index futures were slightly up 0.09%. Hong Kong Stocks eased the sharp decline on Monday, down 0.1% on Tuesday after a volatile session. And most of the US-listed Chinese shares all rebounded from the sharp selloff a day earlier.
  • Cryptocurrencies soared along with the broad rally in tech shares, with Bitcoin topping 20,400 and Ethereum reaching above 1,500, both of which back to their September highs at a time on Tuesday. 
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