| Listen to our audio presentation: Stock Market Timing |
The U.S. stock market experienced a slight decline on Tuesday as investors analyzed early earnings reports from major technology companies, Alphabet and Tesla. This marked the beginning of a crucial earnings period for Big Tech.
The S&P 500 and Dow Jones Industrial Average saw minor decreases, dropping approximately 0.2% and 0.1%, respectively. Meanwhile, the Nasdaq Composite finished just below its previous close. This trend reflects a shift away from the megacap stocks that have driven market gains this year. Conversely, small-cap stocks, represented by the Russell 2000, have surged by 3% over the past two days.
Alphabet’s Mixed Performance
Alphabet, the parent company of Google, reported strong overall results, surpassing both top and bottom-line expectations. The company highlighted the robust performance of its search and cloud businesses, with cloud revenue exceeding $10 billion and operating profit surpassing $1 billion for the first time. Additionally, Alphabet announced a $0.20 cash dividend and reported better-than-expected advertising revenue.
Despite these positives, Alphabet’s shares declined after hours due to disappointing results in network revenue, services revenue, and subscriptions, platforms, and devices revenue. CNBC noted that while Alphabet’s revenue increased by 14% year over year, YouTube’s advertising revenue fell short of expectations, coming in at $8.66 billion compared to the anticipated $8.93 billion .
Tesla’s Earnings Miss
Tesla also reported mixed results, missing earnings expectations but beating on revenue. The company reported a gross margin of 18%, surpassing the consensus estimate of 17.4%. However, Tesla’s stock dropped more than 5% in after-hours trading due to misses on free cash flow, capital expenditure, and operating income .
Other Market Movers
Earlier in the day, General Motors and Coca-Cola also released their earnings reports. GM’s stock fell by approximately 6%, while Coca-Cola’s stock remained flat. These mixed results added to the cautious sentiment among investors .
Regulatory Spotlight on Delta and Surveillance Pricing
In regulatory news, the U.S. government is investigating Delta Air Lines for its handling of flight cancellations and delays caused by a global technology outage. This investigation aims to assess how Delta treats passengers affected by such disruptions .
Additionally, the Federal Trade Commission (FTC) is scrutinizing major companies, including Mastercard and JPMorgan Chase, for their use of AI-driven pricing algorithms. This practice, known as “surveillance pricing,” involves using detailed consumer data to set individualized prices. The FTC is concerned about the potential privacy risks and unfair competition arising from this opaque pricing system .
Resources
Yahoo Finance
Associated Press
CNBC
Inc.com