Tech giants fail to deliver on earnings: Biotechs finding support

27Oct

Tech giants fail to deliver on earnings: Biotechs finding support

 

The Nasdaq and S&P 500 slid Wednesday as traders assessed disappointing earnings from tech giants Microsoft and Alphabet. The Nasdaq has now lost over 29 percent of its value this year, versus a 19 percent decline in the broad-based S&P 500. Technology companies of course were some of the biggest winners during COVID. The tech sector accounts for more than a quarter of the S&P 500 index, giving it an outsize influence on the market as a whole. Alphabet, Amazon, Apple and Microsoft together account for nearly a fifth of the index’s value.

Overnight the Nasdaq dropped 2 per cent. The S&P 500 lost 0.7 per cent. The 30-stock Dow Jones Industrial average traded flat.

Earlier in the day, the Dow rallied more than 300 points as Visa buoyed the index on strong earnings. The S&P 500 was also positive.

The swings in the major indexes reflect a “tug of war” between corporate America and the Federal Reserve that has left investors attempting to balance what companies are reporting and what that means for future interest rate hikes.

Shares of Google-parent Alphabet dropped 9 per cent after the tech giant missed expectations on the top and bottom lines. Alphabet also reported a decline in YouTube ad revenue, which spurred investors to deliberate the outlook for other tech companies that rely on ad spending.

Meanwhile, Microsoft declined about 7 per cent after the tech giant reported weaker-than-expected cloud revenue in its latest quarterly results, despite beating earnings and revenue estimates. The company also issued current-quarter revenue guidance that fell short of expectations.

Meta Platforms reported results were in line but the stock still fell 5 per cent, alongside Atalassian which was down 5 per cent and Amazon lost 4 per cent.

Across the sectors, Utilities and real estate traded slightly negative late in the day. They joined consumer discretionary, communication services and technology in the red.

Within the sectors of note is the performance of the biotech stocks over the last 18 months in particular post the COVID related boom . Biotechs soared during the pandemic. With non-specialist investors and hedge funds piling in, pushing up valuations and funding large swaths of start-ups.

With a broad based 40 per cent pull back in the NASDAQ biotech index, investors are looking at cheap valuations supported by positive data. And while biotech deals like IPO’s and capital raisings have fallen off a cliff, big pharma is currently sitting on a $300bn war chest.

The conditions now appear ripe for an M&A boom: as biotechs are usually bought out by big pharma who have the financial muscle to fund large phase 3 clinical trials and commercialise successful treatments.

On the currency front, one Australian dollar has strengthened compared to the US dollar yesterday, buying 64.92 US cents (Wed: 63.95 US cents), 55.85 Pence Sterling, 95.03 Yen and 64.41 Euro cents.

Now to Commodities the Iron ore futures are pointing to a 1 per cent fall.

Gold gained 0.7 per cent. Silver added 0.7 per cent. Copper jumped 4.3 per cent and Oil gained 3.3 per cent.

The SPI futures are pointing to a 0.4 per cent gain. 

Figures around the globe

Across the Atlantic, European markets closed higher. Paris gained 0.4 per cent, Frankfurt added 1.1 per cent and London’s FTSE closed 0.6 per cent higher.

In Asian markets, Tokyo’s Nikkei added 0.7 per cent, Hong Kong’s Hang Seng gained 1 per cent and China’s Shanghai Composite closed 0.8 per cent higher.

Yesterday, the Australian sharemarket added 0.2 per cent to close at 6811.

Ex-dividends

Acrow Formwork (ASX:ACF) is paying 1.5 cents 60 per cent franked
Bank of Queensland (ASX:BOQ) is paying 24 cents fully franked
Genusplus Group (ASX:GNP) is paying 1.8 cents fully franked
Tribune Resources (ASX:TBR) is paying 20 cents fully franked

Dividends payable

360 Capital REIT (ASX:TOT)
Austin Engineering (ASX:ANG)
Australian Unity Office Fund (ASX:AOF)
Clime Investment Management (ASX:CIW)
Ridley Corp (ASX:RIC)
Turners Automotive Group (ASX:TRA)

Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.
Copyright 2022 – Finance News Network


Source: Finance News Network

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