Microsoft and Meta Reports Are OK, But Not Magnificent
The Mag 7 no longer have the glow of AI to drive them when the numbers are less than stellar — and the news tonight doesn’t make me less cautious.
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The market did a nice job of shaking off some poor news from Eli Lilly LLY and Super Micro Computer SMCI on Wednesday morning, but after an energetic bounce, the buyers faded away, and the indexes closed near the lows of the day. Earnings from Alphabet GOOGL helped the bullish cause, but the stock failed to gain momentum after a strong gap-up opened and closed at the lows of the day, like the indexes. While Small-caps had minor relative strength they lacked sustained momentum like the rest of the market.
At the closing bell, breadth had slipped from 4,200 gainers and 5,200 decliners, with semiconductors SMH declining 2.4% and the Magnificent Seven names MAGS finishing with a small loss.
It was not a good day, and it suggests that market participants are nervous about the big earnings reports due this week and the reaction to the election next week. The market has had a good run in anticipation of a Trump victory, but worries are building about inflation, the likely chaos that the election could bring, and the uncertainty about future economic policies.
Microsoft MSFT beat both estimates for both revenue and EPS and is trading up about 2% initially. The stock often has a big reaction to the conference call, which will come later, but the headline numbers are good enough for now.
Meta Platforms META also had beats on the top and bottom lines, but its revenue beat was very small, and revenue guidance for the fourth quarter is not as robust as hoped. The stock is down, but has bounced back from a quick dip. The conference call will be held later tonight.
These reports aren’t having too much impact on the broader market so far, but they may not be strong enough to generate the momentum that the bulls are hoping for. The Mag 7 no longer have the glow of AI to drive them when the numbers are less than stellar.
I’ve been growing increasingly cautious due to concerns about higher levels of volatility over the next week, and this news tonight doesn’t make me less cautious.
Have a good evening. I’ll see you Thursday.
At the time of publication, Rev Shark had no positions in any securities mentioned.
