Disappointing Earnings News May Lead To Pullback On Wall Street

The major U.S. index futures are currently pointing to a lower open on Friday, with stocks likely to give back ground following the substantial rally seen in the previous session.

A negative reaction to the latest batch of earnings news is likely to weigh on Wall Street, with shares of Amazon (AMZN) tumbling by 10 percent in pre-market trading.

The steep drop by Amazon comes after the online retail giant reported an unexpected first quarter loss and provided disappointing revenue guidance for the current quarter.

Shares of Apple (AAPL) are also seeing pre-market weakness after the tech giant reported better than expected fiscal second quarter earnings but warned supply chain issues would hurt third quarter sales by as much as $8 billion.

Semiconductor giant Intel (INTC) may also move to the downside after reporting first quarter results that exceeded analyst estimates but issued weak guidance for the second quarter.

After another rollercoaster ride early in the session, stocks moved sharply higher over the course of the trading day on Thursday. The tech-heavy Nasdaq led the rally after ending Wednesday’s trading at its lowest closing level in over a year.

The major averages pulled back off their highs going into the close but held on to strong gains. The Dow jumped 614.46 points or 1.9 percent to 33,916.39, the Nasdaq spiked 382.59 points or 3.1 percent to 12,871.53 and the S&P 500 surged 103.54 points or 2.5 percent to 4,287.50.

The rally that emerged on Wall Street came as another batch of upbeat earnings news overshadowed a disappointing report on the U.S. economy.

Shares of Meta (FB) skyrocketed by 18.6 percent on the day after the Facebook parent reported better than expected quarterly earnings.

Chipmaker Qualcomm (QCOM) also moved sharply higher after reporting quarterly results that beat expectations on both the top and bottom lines.

McDonald’s (MCD), Merck (MRK), and Eli Lilly (LLY) also posted strong gains after reporting better than expected quarterly earnings.

Meanwhile, traders seemed to shrug off a report from the Commerce Department showing U.S. economic activity unexpectedly contracted in the first quarter of 2022.

The report said real gross domestic product declined by 1.4 percent in the first quarter after spiking by 6.9 percent in the fourth quarter of 2021. The pullback surprised economists, who had expected GDP to increase by 1.1 percent.

The Commerce Department said the unexpected drop in GDP reflected decreases in private inventory investment, exports, and government spending along with an increase in imports, which are a subtraction in the calculation of GDP

On the other hand, the report showed increases in consumer spending, non-residential fixed investment and residential fixed investment.

Some traders may have interpreted the data as a sign the Federal Reserve will not raise interest rates as aggressively as currently expected.

A separate report from the Labor Department showed first-time claims for U.S. unemployment benefits edged slightly lower in the week ended April 23rd.

With Qualcomm helping to lead the way higher, semiconductor stocks showed a substantial move to the upside on the day.

The Philadelphia Semiconductor Index soared by 5.6 percent after ending the previous session at its lowest closing level in almost a year.

Significant strength also emerged among energy stocks, as the price of crude for June delivery surged $3.34 to $105.36 a barrel amid concerns about supply.

Reflecting the strength in the energy sector, the NYSE Arca Oil Index spiked by 3.4 percent, while the Philadelphia Oil Service Index jumped by 2.5 percent.

Housing, networking, retail and transportation stocks also saw considerable strength on the day, moving notably higher along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are climbing $0.91 to $106.27 a barrel after surging $3.34 to $105.36 a barrel on Thursday. Meanwhile, after inching up $2.60 to $1,891.30 an ounce in the previous session, gold futures are jumping $20.60 to $1,911.90 an ounce.

On the currency front, the U.S. dollar is trading at 130.26 yen versus the 130.85 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.0514 compared to yesterday’s $1.0499.

Asia

Asian stocks saw further upside on Friday, tracking Wall Street’s tech-led gains that came as traders shrugged off the surprise contraction in the U.S. economy in the first quarter of 2022.

The good showing was also attributed to optimism over likely policy support from Beijing amidst the severe Covid curbs. Hong Kong’s Hang Seng led the gains with a 4 percent surge. Japanese markets were closed for a holiday.

China’s Shanghai Composite Index spiked 71.58 points or 2.4 percent to finish at 3,047.06. The day’s trading ranged between 2,968.33 and 3,048.49. The Shenzhen Component Index surged 3.6 percent to close at 11,005.88.

The Hang Seng Index of the Hong Kong Stock Exchange jumped 813.22 points or 4 percent from the previous close to finish trading at 21,089.39.

The Korean Stock Exchange’s Kospi Index added 27.56 points or 1 percent to close at 2,695.05. The day’s trading range was between 2,664.06 and 2696.10.

Australia’s S&P/ASX200 Index closed trading at 7,435.00 after gaining 78.10 points or 1.1 percent. Gambling business PointsBet Holdings, which surged closed to 11 percent after declaring quarterly results, was the best performing stock in the index.

Nickel Mines added 7.4 percent. Uranium miner Paladin Energy, which lost heavily on Thursday, diversified financial business Zip Co. and software business Tyro Payments, all gained more than 6 percent.

Real estate business Unibail-Rodamco-Westfield dropped 4.4 percent. Domino’s Pizza Enterprises as well as healthcare equipment maker Resmed also lost more than 4 percent. Healthcare company Pro Medicus declined 2.8 percent, while mining stock Sandfire Resources shed 1.9 percent.

The NZX50 Index of the New Zealand Stock Exchange added 8.34 points or 0.1 percent to close at 11,884.30. Trading ranged between 11,852.82 and 11,928.70.

Software business Pushpay Holdings was the top gainer with a 5.6 percent rally. Synlait Milk, A2 Milk and software company Serko, all gained more than 2 percent. Healthcare provider Arvida added 1.86 percent.

Fonterra Shareholders Fund shed 3.72 percent. Precinct Properties NZ and Kiwi Property, both lost more than 2 percent. Restaurant Brands NZ and Oceania Healthcare both declined around 1.9 percent.

Europe

European stocks have moved mostly higher during trading on Friday, extending gains from the two previous sessions amid largely encouraging earnings news.

While the German DAX Index has jumped by 1.1 percent, the French CAC 40 Index is up by 0.7 percent and the U.K.’s FTSE 100 Index is up by 0.5 percent.

In economic news, euro area GDP expanded by 0.2 percent in the first quarter versus expectations of 0.3 percent. Yearly GDP growth rose to 5 percent from 4.7 percent in the previous quarter.

As expected, annual inflation in the euro area touched a record high of 7.5 percent in April versus the previous month’s level of 7.4 percent and well above the ECB’s target of 2 percent.

Packaging business Smurfit Kappa Group has jumped after a more than 30 percent surge in revenues in the first quarter.

Consumer goods business Reckitt Benckiser is marginally higher after reporting a 2.3 percent revenue drop in the first quarter and warning of supply chain costs.

Meanwhile, state-backed Natwest Group, which reported a 41 percent increase in first quarter profit, has moved notably lower following its warning of a looming cost of living crisis.

Shares of AstraZeneca have also moved to the downside even though the drug giant reported first quarter sales that surpassed expectations.

U.S. Economic Reports

A report released by the Commerce Department on Friday showed U.S. personal income increased by slightly more than expected in the month of March, while U.S. personal spending jumped by much more than anticipated.

The Commerce Department said personal income rose by 0.5 percent in March after climbing by an upwardly revised 0.7 percent in February.

Economists had expected personal income to rise by 0.4 percent compared to the 0.5 percent increase originally reported for the previous month.

The report also showed personal spending jumped by 1.1 percent in March after advancing by an upwardly revised 0.6 percent in February.

Personal spending was expected to increase by 0.7 percent compared to the 0.2 percent uptick originally reported for the previous month.

At 9:45 am ET, MNI Indicators is scheduled to release its report on Chicago-area business activity in the month of April. The Chicago business barometer is expected to drop to 57.0 in April from 62.9 in March.

The University of Michigan is due to release its revised reading on consumer sentiment in the month of April at 10 am ET. The consumer sentiment index for April is expected to be downwardly revised to 62.0 from the preliminary reading of 65.7.

Stocks In Focus

Shares of Colgate-Palmolive (CL) are seeing notable pre-market weakness after the consumer products giant reported first quarter earnings that matched analyst estimates but warned the difficult cost environment is expected to continue for the next several quarters.

Retail brokerage Robinhood (HOOD) may also come under pressure after reporting a wider than expected first quarter loss amid decreases in revenue and monthly active users.

On the other hand, shares of Mohawk Industries (MHK) are moving sharply higher in pre-market trading after the flooring manufacturer reported first quarter results that beat expectations on both the top and bottom lines.

Home and security products company Fortune Brands (FBHS) is also likely to see initial strength after reporting better than expected first quarter results and announcing it intends to separate into two publicly traded companies.