Tech Dazzles Again

By Alex Eule |  Tuesday, July 27 Big(ger) Tech. It was the most important afternoon of earnings season, with Apple, Microsoft, and Google-parent Alphabet all reporting results within a few minutes of each other right after the market closed. The numbers were good, but as we have written many times, strong earnings don't always equal stock gains. All three companies easily beat Wall Street's estimates. Alphabet shares rose on the news, Microsoft was roughly flat, and Apple was down. And then there was Starbucks. The coffee giant said third-quarter revenue was up 78%. The growth comes off a Covid low a year ago, but that doesn't take away from the total number -- revenue hit a record $7.5 billion in the quarter. The company also raised its earnings outlook for the full year. It wasn't enough. Shares of Starbucks, which have been on a tear since the positive vaccine news last year, were down 3% in after-hours trading tonight.  Check out all of Barron's earnings coverage here. Investors braced for the big day in tech earnings by selling stocks. The Nasdaq Composite fell 1.2% on the day. It was the tech-heavy index's worst day since May, and it snapped a five-day winning streak. The broad-based S&P 500 was down 0.5%, while the Dow Jones Industrial Average fell 86 points, or 0.2%.  The big tech earnings continue this week with results still expected from Facebook and Amazon.com.  Earnings news will have competition tomorrow, when the Federal Reserve Open Market Committee releases its latest policy statement at 2 p.m. followed by Fed Chairman Jerome Powell's regular press conference.  In addition to inflation, the Fed will be paying close attention to Covid variants and its impact on the labor market and return-to-work trends. My colleague Randall Forsyth highlights some of the Fed's many challenges in his Barron's story today:  At the same time, the economy has passed its peak growth and is expected to decelerate significantly from here on to 2022. Goldman Sachs on Monday reduced its GDP forecast, in line with the consensus of economists to 6.6% for the full year of 2021, but to a sharply lower trajectory next year, back to the prepandemic trend rate of just 1.5% to 2%. ...  Goldman’s concern is a handoff from goods to services spending will be delayed or thwarted, especially as a slower return to offices continues to keep a lid on workers’ spending for commuting, work clothes and dry cleaning, and food away from home. ... Nobody is suggesting the Fed is about to raise its key federal funds interest rate target from its current rock-bottom 0-0.25%, however. But the FOMC faces conflicting forces about continuing its massive liquidity injections that were initiated at the height of the pandemic crisis in March 2020 as the economy is passing from its peak growth phase and inflation is causing consternation on Main Street. Whatever it decides, Powell will have some explaining to do Wednesday at his post-confab press conference. You can read the rest of Randy's column here.

 

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