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China: Economic data misses expectations, tech earnings on tap

U.S. equity markets opened lower and turned mixed on the heels of disappointing retail sales data and weak guidance from home improvement retailer, Home Depot Inc. (NYSE: HD). Retail sales rose by just 0.4% in April –– missing forecasts calling for an increase of 0.8%, following the retreat in March. Ahead of a slew of earnings from U.S. retailers, Home Depot shares slid over 1% in morning trade as it slashed its sales and earnings forecasts for the year.

Overseas in China, economic data releases reflected an economy that is still in recovery. Key data including retail sales, industrial production, fixed asset investment, and manufacturing PMI came in below expectations.

Earnings from Baidu Inc. (NASDAQ: BIDU) topped earnings estimates with Q1 revenue rising by 10% as businesses boosted ad spending. Baidu shares advanced on Tuesday, extending a higher close ahead of quarterly results. Separately, Alibaba Group Holding Ltd. (NYSE: BABA) is scheduled to report an improvement in EPS and revenue when it releases earnings on Thursday.

China abandoned strict COVID restrictions at the end of last year. Some investors took bets on the reopening trade in the economy. Q1 2023 GDP for China expanded 4.5% but only time will tell if momentum will remain strong among businesses in the world’s second-largest economy.

Video transcript

BRAD SMITH: Stocks looking for direction in early trade amid a big miss for Home Depot and a rebound in retail sales. Let's get to the NYSE and Yahoo Finance contributor Remy Blaire. Remy, great to see you this morning.

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REMY BLAIRE: Good morning. And as you mentioned, US stocks have opened in the red. And although we saw a brief pop into positive territory for the NASDAQ overall, there are concerns about retail sales figures as well as that disappointing guidance out from Home Depot earlier this morning. Meanwhile, overseas in China, we got a slew of economic data releases.

And we did get some double digit percentage gains. But at the same time, they still came in weaker than estimates. Taking a closer look at the April data coming out from China, we saw retail sales rising 18.4%. Industrial production up 5.6% year over year. And fixed asset investment up by 4.7%. At the same time, we got two readings in terms of manufacturing PMI out from China. But they both came in below the 50 reading.

And moving on to company stocks, let's take a look at Baidu. Baidu reported first quarter revenue that did top estimates. Now, keep in mind that revenue rose by 10%. And this did come as businesses upped their advertising spend. Strict COVID restrictions were dropped in the end of 2022. And this was the first reading for the company following those lifting of restrictions. Although we did see gains for the company before the closing bell, we are seeing that stock hover near the flat line this morning.

Now, I want to move over to Alibaba. The company will report earnings ahead of the opening bell here in the US on Thursday, May 18. Now, ahead of that, forecasts do call for an increase in EPS as well as improvement in revenue. This does come after the fourth quarter '22 figures did post an EPS miss. Meanwhile, Alibaba announced that it is splitting its business into six separate units. And the company says this new decentralized structure could save the company a whopping $1 billion before the end of 2023.

We are seeing shares of the e-commerce giant trade on the-- on near flat today. But following that announcement earlier this year in March, we did see Alibaba shares pop by double digits. And I do want to mention one thing. Money manager Michael Burry of the long short fame made a contrarian bet on Alibaba. And this is according to the latest 13F filings that were released on the SEC website on Monday.

Now, keep in mind that China's economy is still recovering, and its latest GDP figures gained by 4 and 1/2% earlier this year. So compared to the US, we are seeing upside in terms of economic data. But at the same time, it might not be enough to improve sentiment over in China.