Yahoo Finance Nasdaq falls as Alphabet's sales miss weighs on tech stocks
Stocks ended Tuesday’s session mixed amid a batch of corporate earnings results and an impending monetary policy decision from the Federal Reserve.
The S&P 500 (^GSPC) rose 0.1% or 2.8 points, as of market close. The Dow (^DJI) rose 0.15%, or 38.52 points, as shares of Pfizer (PFE) climbed amid strong quarterly results and upwardly revised earnings guidance.
The Nasdaq (^IXIC) fell 0.66%, or 54.09 points, as tech stocks came under pressure in the wake of Google-parent company Alphabet’s (GOOG, GOOGL) weak earnings report Monday afternoon.
The internet giant reported quarterly revenue that fell short of expectations as growth in Google’s ad decelerated to the slowest pace since 2015, bucking the trend after other internet companies like Facebook (FB) and Twitter (TWTR) earlier this earnings season reported strength in their own key advertising segments. Alphabet’s management pointed to currency impacts and product changes at YouTube – a major driver of ad revenue for Google – for the sales miss.
Investors punished the top-line miss, with the stock down 7.7% to $1,188.48 per share as of market close. However, many analysts remain optimistic on the long-term prospects for the company.
“The slowdown likely was the result of a tough comp from ad monetization improvements that benefited 2018 results,” Raymond James analyst Aaron Kessler, who rates shares of Alphabet as Outperform, wrote in a note Tuesday. “While the growth outlook is modestly lower for 2019, we believe growth remains solid given Google’s scale.”
Peer tech stock Apple (AAPL) reports results after-the-bell Tuesday, closing out first-quarter earnings reports for the FAANG stocks. Investors will be eying hardware revenues after the company posted a year-over-year decline in iPhone net sales and total device revenue for its fiscal first quarter. However, Apple management has recently been touting newer Services offerings to offset hardware weakness, so market participants will be looking to see the company back up these assertions with strong top-line growth in this segment.
Elsewhere, the Federal Open Market Committee kicks off the first of two days of meetings on Tuesday. As of Tuesday afternoon, markets were pricing in a 98% probability that central bank officials would leave key interest rates unchanged at the current band of between 2.25% and 2.5%, and a 2% probability that rates would be cut by 25 basis points, according to CME Group’s closely watched FedWatch tool.
This marks the first Federal Reserve policy statement and press conference from Chairman Jerome Powell since central bank officials telegraphed in March that rates would likely remain on hold through 2019. Data on the domestic economy has firmed over the course of the past month, with the labor market chugging along with low unemployment, retail sales rebounding and overall output surging ahead of expectations, while inflation signals have come in consistently below the Federal Reserve’s 2% target.
The dollar index slipped slightly to below 98 and the yield on the 10-year U.S. Treasury note fell 3.1 basis points to 2.505% around 4:11 p.m. ET.
STOCKS
General Electric (GE) reported stronger-than-expected top- and bottom-line results and slowed some of the bleed in cash outflow, sending shares higher in early trading. Adjusted earnings were 14 cents per share on revenue of $27.3 billion, exceeding estimates of 9 cents per share on revenue of $27.11 billion. GE’s industrial free cash flow – which consists of money remaining after accounting for operating expenses and capital spending – was negative $1.2 billion for the quarter, less than half of the $2.9 billion in outflow analysts were expecting. GE reaffirmed its guidance for 2019, but added that it considers Boeing’s (BA) grounded 737 Max airplanes to be a “new risk” to future performance, as GE produces engines for the planes as part of its aviation unit.
McDonald’s (MCD) exceeded consensus expectations for first-quarter sales, with especially strong results in its home market suggesting the company’s expanded breakfast offerings and delivery partnerships with companies including UberEats have begun to pay off. In the U.S., comparable same-store sales rose 4.5%, versus 3% expected, while global same-store sales rose 5.4%, versus 3.4% expected. Total revenue was $4.96 billion ,versus $4.93 billion, while earnings per share of $1.72 were just short of expectations for $1.75 per share.
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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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