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Stock Market's 15-Week Rally Stalls, Earnings Season Kicks Off with Google and Microsoft

By:JJ Kinahan

Also, Bitcoin surges as spot ETF approval nears and Chevron acquires rival Hess in $53B deal

  • The stock market streak ends with S&P 500 down and Nasdaq up.
  • Corporate acquisitions are reshaping industries with Chevron-Hess and Disney-Reliance deals in the spotlight.
  • Bitcoin is soaring on ETF hopes, and earnings season has become vital amid market uncertainties and interest rate concerns.

After a remarkable run of fifteen consecutive Mondays with stock prices closing higher, the trend was finally disrupted yesterday. The S&P 500 index experienced a modest decline of 0.2%, settling at its lowest point since May. However, the Nasdaq managed to eke out a minor gain of 0.3%. A notable occurrence during the trading day was the yield on the 10-year Treasury note briefly touching 5%, a level not seen since 2007, before receding to a more conservative 4.836%. This financial landscape unfolded just as the eagerly awaited earnings season was about to kick off, with Google's parent company, Alphabet (GOOGL), and tech giant Microsoft (MSFT) slated to release their financial reports after the closing bell.

This morning, the Coca-Cola (KO) company reported earnings that surpassed expectations and simultaneously revised its guidance upwards. Surprisingly, the stock remained relatively unchanged in response to this positive news. General Electric (GE) also raised its guidance after delivering earnings that exceeded forecasts, propelling their stock to a notable premarket surge of over 5%. Industrial conglomerate 3M (MMM) also achieved impressive results, beating quarterly predictions and raising its guidance for the full year, leading to a 3.5% increase in premarket trading. General Motors (GM) reported its earnings, but in light of the ongoing United Auto Workers (UAW) strike, the company decided not to offer any forward-looking guidance.

Following the close of the trading day, Alphabet and Microsoft were scheduled to unveil their quarterly earnings reports. For Microsoft, market watchers were eager to learn how it planned to integrate its recently finalized acquisition of Activision Blizzard and were also interested in the performance of its cloud services business. In the case of Alphabet, investors were keen to glean insights into the performance of YouTube TV and advertising revenue. Both companies had been enjoying a prosperous year, with Alphabet shares experiencing a remarkable uptick of nearly 57% and Microsoft's stock surging by almost 38%.

Proposed acquisitions

In other corners of the market, significant developments were unfolding. Chevron (CVX) made headlines by announcing its intention to acquire rival corporation Hess in a deal valued at a staggering $53 billion. Simultaneously, Disney (DIS) was rumored to be in discussions regarding the potential sale of its Indian operations to Reliance Industries, with the deal's value estimated to fall within the range of $7 billion to $10 billion.

In the realm of cryptocurrencies, Bitcoin (BTC) exhibited notable volatility, trading as high as $34,900 in premarket sessions. This surge was attributed to growing optimism regarding the potential approval of a spot Bitcoin exchange-traded fund (ETF). Such news was enthusiastically received by crypto traders, pushing Bitcoin to prices unseen since May 2022.

Big names to announce earnings

Turning our focus back to earnings, the upcoming two weeks were poised to witness some of the biggest names in the corporate world revealing their financial performance. While stocks had experienced significant gains in the first half of the year, they had encountered challenges in the second half. The Nasdaq Composite index, for instance, had only managed to muster less than a 1% increase since the end of May, following an impressive 24% surge in the initial six months of the year. The S&P 500 had posted a commendable gain of nearly 9% during the first half of the year but had similarly struggled to achieve substantial growth in the subsequent months.

Against the backdrop of geopolitical uncertainties and rising interest rates, the importance of earnings reports and forward-looking statements was underscored. Investors were encouraged to stay true to their investment plans and long-term objectives, maintaining a vigilant eye on the financial landscape.

JJ Kinahan is CEO of IG North America—which includes tastylive, tastytrade and IG's FX Business. Kinahan traded for 21 years at the Chicago Board Options Exchange. He serves on the CBOE Advisory Board and the SIFMA Options Committee. @thejjkinahan

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