Trader on the floor of the NYSE, October 25, 2022.
Here are the most important news items investors need to start their trading day:
1. Time to call IT
Stocks were on a roll going into Wednesday. The major US indexes had another big day on Tuesday, extending equities’ winning streak to three days. But then a few big tech companies reported quarterly results (more on that below), and suddenly a fairly solid earnings season started to look a little clearer. More Big Tech earnings are also coming this week: parent Facebook Meta on deck to report after the bell on Wednesday, and Apple and Amazon go thursday. Read live market updates here.
2. A cloud perspective from Microsoft
Satya Nadella, CEO of Microsoft
Microsoft beat the top and bottom lines when it reported quarterly results on Tuesday, but weak cloud revenue and downbeat guidance weighed on the tech giant’s shares in after-hours trading. Wall Street had expected the pace of the public cloud business to pick up Azure’s revenue growth in the quarter, but it came in lower than projections, and not just because of a slowdown in consumption growth. Chief Financial Officer Amy Hood said energy costs are weighing on Azure’s gross margin, another example of how inflation is taking a toll on just about everything.
3. Google ads problem
Alphabet, the other tech behemoth to report earnings on Tuesday, didn’t fare much better for investors as it asserted broader fears about the online ad market. Google’s parent said YouTube’s ad revenue fell about 2% year over year, while Wall Street had expected a 3% increase. Although overall advertising revenue for Alphabet rose slightly in the quarter, the company saw lower spending in search ads for categories such as mortgages, which are suffering from declining demand due to rising rates (see below), and cryptocurrency, which experienced a sharp downturn. this year along with other markets.
4. Claims on mortgages
A home for sale real estate sign is seen in front of a home in Arlington, Virginia, November 19, 2020.
Sahall Loeb | AFP | Getty Images
Demand for mortgages has fallen to a 25-year low thanks largely to soaring interest rates, according to the Mortgage Bankers Association. The rate for the most common mortgage, the 30-year fixed rate, is hovering above 7% after starting the year at around 3%. The rapid recovery, which came after years of low rates and easy money from the Federal Reserve, redeemed what had become a super-hot market in the first two years of the Covid Pandemic, as Americans built homes in the suburbs and suburbs. Although prices are still higher than they were a year ago, the pace of increases has greatly improved as rates scare sellers, buyers and builders alike.
5. ‘The heaviest battles’
Civilians evacuated from the Russian-controlled city of Kherson arrive by ferry in the town of Oleshky, Kherson region, Russian-controlled Ukraine October 22, 2022.
Alexander Ermochenko Reuters
Ukrainian officials said Russian forces are gathering strength and numbers in the southern port city of Kherson. In recent weeks the Ukrainian military has routed the Russian army in the south and east, seizing back territory claimed by Russia in the early days of the war. Now Kherson is shaping up to be a major flashpoint in this phase of the fight. “It means that no one is preparing to withdraw,” said an adviser to the President of Ukraine Volodomyr Zelenskyy, referring to recent moves in Russia. “On the contrary, the heaviest battles will take place for Kherson.” Read live war updates here.
– CNBC’s Sarah Min, Jordan Novet, Jennifer Elias, Diana Olick and Natasha Turak contributed to this report.
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