MARKETS TODAY Oct 26 (Vica Partners) – The S&P 500 down 0.21% as of 1.20 p.m. Eastern. The Dow Jones Industrial Average up 125 points, or 0.39%, to 31,962. The tech based Nasdaq down 1.35%.
Stock indexes mixed in mid-day trading session, the 10-year Treasury flat with a yield at 4.007%. U.S. Dollar Index (DXY) is also down at $109.78. Oil prices up with Brent crude $95.81, 2.45%, and US West Texas Intermediate $88.03, +3.18%.
Expect tech stocks to continue to take a hit from rising interest rates and a strong dollar
The tech-heavy Nasdaq 100 has dropped almost 33 percent so far in 2022 and will continue to test lows. FACT: Apple (AAPL), Microsoft (MSFT), Google-parent Alphabet (GOOGL) and Amazon (AMZN) represent more than 30% of the Nasdaq Composite and +20% of the S&P 500.
Megacap tech earnings effecting the market today
Google parent Alphabet (GOOG, GOOGL) reported its third-quarter earnings on Tuesday. Alphabet’s profit dropped 27% from a Year earlier and reported earnings that were below analysts’ expectations, returning $13.9 billion in profit on $69.1 billion in sales.
Revenue was up 6% from $65.1 billion in Q3 2021, with operating income at $17.14 billion and net income of $13.91 billion for this quarter (versus $18.94 billion a year ago). Alphabet reported $69.7 billion in revenue and $16 billion in net income last quarter. YouTube advertising revenue came up $400 million short of estimates. Cloud reported $6.87 billion (compared to $4.99 billion in Q2 2021).
Microsoft (MSFT) reported better-than-expected results for the September quarter, but provided December quarter guidance below analyst’s estimates across all segments. For the quarter, the reported revenue of $50.1 billion, up 11%, beating the consensus forecast of $49.7 billion. Profits were $2.35 a share, again beating the consensus of $2.31. Revenue from its Windows OEM operations fell 15% from the year prior and worldwide PC shipments declined 19.5% in the third quarter of 2022. Microsoft’s Azure cloud services unit saw revenue increase by 35%.
New Home Sales better than analyst expectations
New home sales decreased to 603,000 in September but above analyst expectations of 593,000. That represents a 10.9 percent below the revised August rate of 677,000 and is 17.6 percent below the September 2021 estimate of 732,000.
Value is king and performance in key sectors remain strong (emerging 30 day Sector watchlist)
Rental & Leasing Industry +49.4%, Oil Well Services & Equipment Industry +42.8%, Iron & Steel Industry +20.1%, Biotechnology & Pharmaceuticals Industry +19.3%, Airline Industry +18.4%, Broadcasting Media & Cable TV Industry +17.9%, Construction & Mining Machinery Industry +17.6%, Aluminum Industry +16.0%, Life Insurance Industry +15.8%, Educational Services Industry +15.4%.
IMPORTANT TO READ as low interest rates will return
The Federal Reserve will be forced to cut interest rates in 2023 if a deep recession occurs as the cure for inflation is not just raising rates. As we see a significant policy change coming by late Spring of 2023 with Powell reversing direction… just look at 12 month declining lower commodity pricing and new reports on rising retail inventories.
Yearly commodity prices will rise “as there are production shortages” which include: iron, copper and crude oil. Upside will continue!
Solid strategy for these type of market days ….
We suggest investing in companies that have solid balance sheets and offer dividends.
Best to continue to cost average buy value stocks and resist most all tech and growth stocks where companies have negative margins. Our Teams forecast a negative 5-7% valuation correction for speculative stocks. DON’T try to time market lows!
*** Watch for our emerging 30/ 60/ 90 day Sector and leading company watchlist’s
*** Look to Index ETF’s like SPY to outperform stocks and most managed funds
*** Energy is the Top Performing Sector in S&P 500 Year to Date and will regain strength shortly
*** Banks will profit from higher interest rates on new loans and other products which will offset defaults
