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With a massive week of corporate results under way, Google
parent Alphabet Inc reported first-quarter revenue below
expectations, while software giant Microsoft Corp forecast
double-digit revenue growth for its next fiscal year.
Investors have focused on results from some of Wall Street’s
biggest names this week, hoping they could provide a
counterweight to the deluge of news that has battered stocks in
recent days, highlighted by concerns over an increasingly
hawkish Federal Reserve to worries over geopolitical turbulence
stemming from Russia’s invasion of Ukraine.
Though most of the earnings season lies ahead, some investors
worry that anything less than stellar results from corporate
behemoths will do little to stem a slide in stocks that left the
S&P 500 down 12.4% on the year after Tuesday’s 2.8% drop. The
Nasdaq on Tuesday hit its lowest closing level since December
2020 as it lost nearly 4%, bringing it 22% below the all-time
high it hit less than six months ago, on Nov. 19.
"There's a lot of anxiety ahead of the earnings ... because if
they don't hold up, then there's nothing left to hold up the
market," said Thomas Hayes, chairman at Great Hill Capital in
New York.
Despite the mixed results from big growth names, earnings in the
broad S&P 500 have topped analyst expectations. Overall, about
81% of companies have exceeded earnings expectations, with
first-quarter profits now expected to have climbed 8.2% from the
year-ago period, up from an estimated 6.4% at the start of
April, according to Refinitiv data as of Tuesday morning.
Yet there have been some high-profile disappointments, including
growth-stock poster child Netflix, whose shares were pummeled
after its results.
“Expectations for growth (companies) are very, very high, and
you don’t meet expectations and you are going to see the Netflix
or the Google drops," said Paul Nolte, portfolio manager at
Kingsview Investment Management in Chicago. “It's not industry
specific, it’s more company specific.”
Microsoft’s shares were higher in after-hours trading on
Tuesday, while Alphabet’s declined.
In another setback for growth stocks, Tesla shares tumbled 12%
on Tuesday after the electric carmaker's CEO, Elon Musk,
clinched his deal to buy Twitter for $44 billion.
But on the upbeat side, shares of Visa rose in after-hours trade
on Tuesday after the payments company said it expects revenue to
accelerate past pre-pandemic levels. Markets could get fresh
jolts later this week as other results flow in, including from
Apple, Amazon.com and Facebook owner Meta Platforms. With only a
few days left in the month, the S&P 500 is down 7.8% for April
so far, which would be its biggest monthly percentage drop since
March 2020.
Even so, there may be some reason for optimism in April's final
days. According to Bespoke Investment Group, in 39 prior months
since 1980 where the S&P 500 was down at least 5% with three
trading days left, the S&P averaged a gain of 1.51% in the final
three trading days of these months. "Usually, the final three
trading days of these bad months offer up some relief for
investors," Bespoke said in a note.
(Reporting by David Randall, Lewis Krauskopf, Bansari Kamdar and
Herbert Lash; Editing by Ira Iosebashvili and Leslie Adler)
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