Alphabet and Microsoft neutralize each other

The earnings campaign for the first half of 2023 is in full swing, with both good and bad surprises in store. China's stock markets are getting back on track, technology stocks are regaining the lead in the US, and Europe has entered a period of uncertainty as the pace of quarterly earnings releases intensifies. So much for the general backdrop, as the financial world sets its sights on the Federal Reserve's regular meeting, which will monopolize attention this evening at 2:00 pm We'll be talking about it in today's column.

In the United States, the mood was more relaxed, with the Nasdaq100 gaining just over 0.70% yesterday, while the European stock markets posted another session of XXS variations, hovering around equilibrium, a sign of a certain caution ahead of the Fed's rate verdict. There's every reason to believe that the markets have taken on board the idea that the Fed will raise rates by 25 basis points; the probability of such a hike is practically equal to one. Investors are more likely to listen to Jerome Powell's forward-looking indications. In other words, they'll be looking for the slightest sign or hint that the Fed may be setting new, more accommodative caps, synonymous with a bright future with the liquidity floodgates open.

In the meantime, investors are inundated with results. The Microsoft/Alphabet duo was out last night after the close of Wall Street. In the midst of the artificial intelligence race, the performance of both groups is being closely watched, as it may well confirm or refute the Nasdaq's performance since the start of the year. Alphabet's results are considered great, thanks to strong growth in advertising, and offset investors' disappointment at Microsoft's release. Microsoft's results, which exceeded market expectations but suffered a (very) slight deceleration in cloud growth. This is still a far cry from the downturn experienced by Snap, for example, which is expecting tough times ahead, a fact which caused its share price to fall by almost 18% after the close of trading.

Yesterday, after the European trading session, LVMH published results that paint a different picture of the state of Chinese demand, as China and Asia, in general, dragged down the Group's results. Despite a performance in line with expectations, or even slightly above consensus if I go by our value sheets, the publication was received coolly by investors, surely because LVMH refrained from giving an outlook for the rest of the year.

Other publications are expected today such as Meta Platforms, The Coca-Cola Company and Boeing in the United States, Christian Dior, Airbus and Rio Tinto in Europe, and CATL (or Contemporary Amperex Technology Co) in Asia, the Chinese battery giant.

Finally, a word about the IMF, which yesterday updated its outlook for the world economy. Broadly speaking, the IMF is more optimistic than it was in April, since it now expects global growth to reach 3% in 2023, compared with 2.8% previously. Two things stand out in my mind. Firstly, the American recession, so often announced, predicted and prophesied, has finally been averted. Secondly, the job of an economist is, frankly, a difficult one. Uncle Sam's economy remains resilient, despite repeated rate hikes. Germany is likely to be the only G7 country to experience a recession this year.

In the Asia-Pacific region, the Nikkei is hovering around equilibrium, while Chinese markets are catching their breath after last night's sharp rebound. Elsewhere, India was up, while the Kospi was down 1.22%.

Today's economic highlights

US new home sales will be released at 10 am, followed by weekly oil inventories (10:30 am). The US monetary policy decision will then be announced at 2:00 pm. In addition, the full macro agenda here.

The dollar gains ground at 0.9022 EUR and 0.7741 GBP, while the ounce of gold remains unchanged at 1971 USD. Oil consolidates, with North Sea Brent at USD 82.42 a barrel and US light crude WTI at USD 78.76. US debt posted a 10-year yield of 3.89%. Bitcoin is trading at 29200 USD.

In corporate news:

• Amazon fell by 2% before the opening, as Politico reported that the US antitrust authority was finalizing its legal action against the group, a decision that could split the company.
  
• Alphabet reported second-quarter net earnings of $1.44 per share, against a consensus of $1.34 per share. The stock gained 6.8% in after-hours trading.
  
• On Tuesday, Microsoft reported an increase in sales to $56.2 billion for the quarter ended June, against a consensus of $55.5 billion, according to Refinitiv. Shares were down 15% after the close, with AI-related expenses outstripping associated revenues.
  
• VISA reported annual results in line with Wall Street estimates on Tuesday, as executives sought to allay fears of a slowdown in customer spending after reporting its smallest quarterly profit increase in more than two years. Revenues from Visa's international transactions rose by 14%, against a consensus of 18%.
  
• Meta Platforms was up 1.9% ahead of the open, as Alibaba's cloud computing division said it would support Meta's artificial intelligence model, Llama, enabling its Chinese business users to develop programs from the model.
  
• Wells Fargo said Tuesday that its board of directors had authorized a new $30 billion share buyback program. The stock was up 1% after the close.
  
• Banc Of California and PacWest Bancorp will merge to create a bank with $36 billion in assets, the companies announced Tuesday. The lenders will raise $400 million in equity capital from investors, and will be advised by Warburg Pincus and Centerbridge Partners. The new bank will have $25.3 billion in total loans and more than 70 branches in California. Banc Of California shares rose by 14.1% before the opening, while PacWest shares advanced by 35%.
  
• Snap falls 16.5% after the close, with the company forecasting third-quarter revenues of between $1.07 billion and $1.13 billion, compared with estimates of $1.13 billion, according to data from Refinitiv.
  
• Dish Network is up 9.7% before the open, with Bloomberg reporting that the group will start selling its high-end wireless service on Amazon later this week.
  
• Texas Instruments forecast third-quarter earnings per share in the range of $1.68 to $1.92, below expectations of $1.91 per share on Tuesday. The stock was down around 4% after the close.
  
• Robert Half was down 12.7% after the close, as the company reported quarterly revenues of $1.64 billion against forecasts of $1.69 billion, according to Refinitiv data.
  
• Quarterly results from Coca-Cola, Boeing and Meta are expected today.
  
• Target lost 1.5% before the opening after Raymond James lowered its recommendation from "buy" to "performance in line with the market".

Analyst recommendations:

• Alaska Air Group: Susquehanna Financial cut the target to $58 from $65. Maintains positive rating.
• Alphabet: Mizuho Securities maintains buy rating. PT up 27% to $155.
• BankUnited: RBC Capital Markets maintains sector perform rating. Price target up 2.4% to $29.
• Biogen: RBC raised the price target to $379. Maintains outperform rating.
• Canadian National Railway: Veritas Investment Research raised the recommendation to buy from reduce. PT set to C$167.
• Hubbell: Mizuho Securities upgrades price target to $370. Maintains buy rating.
• Humana: BH Securities initiated coverage with a recommendation of buy. PT set to $548.67.
• Moody's: RBC Capital Markets maintains outperform rating. Price target up to $404 from $350.
• NXP Semiconductors: Truist Securities increases price target by 14% to $251 from $217.
• PulteGroup: RBC Capital Markets raised the target to $90 from $68. Maintains sector perform rating.
• Sherwin-Williams: RBC Capital Markets raised the recommendation to $315 from $272.
• Visa: RBC Capital Markets raised the target to $290 from $265. Maintains outperform rating.
• Whirlpool: Accountability Research cut the recommendation to sell from hold. PT set to $135.