Investors don’t know what to make of tech giants’ results

Volatility continues on equity markets due to mixed corporate results. After a strong session yesterday, the Nasdaq 100 opened 2% lower after the disappointing results from Alphabet and Microsoft, which renewed fears of recession.

Both stocks were down about 6% in premarket trading. Meta Platforms is due to report today after the close and was down 4%.

Today’s drop comes after a prolific session for the Nasdaq and its technology stocks, which closed up 2.1%, while the broad and more diversified S&P 500 index gained 1.6%. Investors yesterday mostly shunned the oil compartment, its favorite of recent months, to return to stocks under attack in 2022.

As mentioned in previous columns, something has changed in the narrative since Friday. This change coincides with a series of poor macroeconomic statistics in the US and elsewhere. This has given credence to the theory that the US central bank’s efforts to slow economic activity are paying off. This implies that the time when it will no longer be necessary to raise rates is approaching. If everything goes according to plan, of course, that is, if the slowdown is accompanied by a decline in inflation. And if the economic slowdown ends with a soft landing and not a runway exit.

The negative macroeconomic signals that have been trending are starting to trickle down to companies, as can be seen with the disappointing results from tech giants. Wait…if the macro is slowing and companies are struggling, why are stocks rising, you might ask? Simply because it gives investors the feeling that the US central bank has not launched the most brutal rate hike cycle in decades for peanuts, and that it is not immune to success in its inflation control efforts.

There are two key moments in this kind of cycle. First the time of the changing discourse, then the time of the changing actions. The time of the changing discourse may have arrived. But it’s the more important of the two moments, because it’s the one that sends the buy signal to investors, who are looking for anticipation. They just need a plan, a compass and a time to go. Until now, they have only had the plan in their hands. The latest news may have provided them with the compass and the time. Again, this is conditional, because I have seen too much to imagine that everything will evolve in a linear way in the coming weeks. We’re still in the midst of mid-term elections in the US, a war in Europe, an energy crisis and some worrying imbalances.

There will be even more corporate results than the day before today. Traditionally during the quarterly season, the most crowded days are Wednesday and Thursday.

In other news, the appointment of the new British Prime Minister Rishi Sunak has helped ease some of the concerns about the British economy. Chinese stock markets are stabilizing after Monday’s mini-crash, following the strengthening of Xi Jinping’s grip on the country’s executive branch after the 20th CCP Congress.