US stocks rose on mixed earnings on Wednesday as solid gains from Microsoft helped ease investor sentiment after a sell-off in the technology sector earlier in the week.
The S&P 500 added 0.2 percent, heading for its worst monthly performance since markets tumbled in March 2020. The heavyweight Nasdaq Composite hasn’t changed much.
Microsoft, which has a market capitalization of $2 trillion, It topped analysts’ expectations As for revenue and earnings in the fourth quarter, CEO Satya Nadella predicted technology spending would remain strong even if economic growth slowed.
Meanwhile, Google’s Alphabet reported a $1.5 billion decline in quarterly profit after the shutdown bell on Tuesday, citing a slowdown in European ad spending in the YouTube segment, spurred by Russia’s invasion of Ukraine.
Ahead of this earnings season, some investors had hoped that the dominance of big tech companies would secure their finances and relatively high valuations in the face of the economic pressures of war and the impact of rising inflation on household finances. Apple and Amazon haven’t reported the results yet.
“This sector is priced for perfection and set up for failure,” said Julian Howard, principal investment manager for multi-asset solutions at fund manager GAM. “Anything less than something really good [earnings] The market will punish her severely.”
Microsoft’s performance provided reassurance, said Antoine Lissen, head of research and strategy at the SPDR ETF in State Street. “Not all profits are that bad,” he said. The next big question is have we passed the peak of inflation? We believe that some stability will remain and central banks will have to tighten and take a hit [high growth tech] more.”
In government debt markets, the yield on US 10-year Treasuries rose 0.1 percentage point to 2.84 percent, after a bout of safe haven buying earlier in the week. The yield on policy-sensitive two-year bonds rose 0.1 percentage point to 2.6 percent.
The dollar index reached its highest point since 2017 after US Federal Reserve Chairman Jay Powell indicated that the central bank is ready for a series of interest rate increases to combat rising consumer prices. But China’s strict social restrictions, stemming from the country’s non-proliferation policy, have muddied investors’ expectations about inflation.
“Markets are trying to sort out the economic consequences of the lockdowns in China,” said Gergeli Majoros, a member of the Carmeniak investment committee, noting the risks of faltering manufacturing supply chains exacerbating inflationary pressures from Russia’s invasion of Ukraine, which boosted fuel and food prices.
But Majoros said that the Chinese authorities, having allowed the country’s currency under tight control, to weaken, would also reduce the cost of importing goods from the global workshop, which “could be deflationary”.
The European Stoxx 600 regional index closed up 0.7 percent. The weakening of the euro, which reached a new level, has helped exporters Lowest level in five years Against the dollar at $1.0515, amid bets on a sharp rise in interest rates in the United States.