Major US stock indices closed slightly lower on Tuesday following a turbulent session, as technology stocks led losses with Nasdaq down by 1.40%.
Alphabet, where revenues come mostly from Google ads, announced better-than-expected overall revenue in the first quarter as business was flourishing before Covid-19, and despite the significant decline in ads from consumer cyclical sectors such as travel and leisure later in the quarter. Yet, Alphabet’s own profit fell and the company’s decision to cut its marketing spending due to coronavirus-hit activity may have a blow effect on the tech industry, especially on its sub-contractors. Still the Alphabet shares rose 4% in the after-hours trading.
Looking at the bigger picture, even though the S&P500 successfully holds on to its gains since the beginning of the earnings announcements, this was mainly thanks to a couple of key growth stocks, including Amazon that continue boosting the index higher, while not all companies do as well compared to the benchmark index. In this sense, the leading market indices may not reflect the true nature of the market sentiment as earnings pour in, especially provided that FAANG stocks, which make up to 15% of the S&P500 index, tend to skew the index to the upside, as these stocks are perhaps not as badly hit by the coronavirus lockdown, in contrary. If we see headwinds in these stocks, the S&P500 could rapidly retreat.
Equities in Asia were mostly in the green, the ASX 200 rebounded past 1%, Shanghai’s Composite (+0.47%) and Hang Seng (+0.29%) recorded timid gains.
Activity in FTSE futures (+0.60%) hint at a bullish start in London.
