Amazon Disappoints While Exxon And Chevron Strike Gold

Key Takeaways

• AWS Disappoints
• Intel Continues To Struggle
• Expectations Are For Quarter Point Rate Hike From Fed

Following a surprisingly strong report from Facebook parent Meta Platforms, stocks rallied sharply Thursday. The S&P 500 jumped 2% and the Nasdaq Composite jumped nearly 2.5%. However, after the close Thursday, Amazon ruined an otherwise strong day and set the stage for what could potentially be a choppy end to the week.

Although Amazon beat on both revenues and profits, growth in cloud computing provider AWS slowed to 11% from 16%. That was the slowest rate of growth in the sector since Amazon began reporting it separately back in 2015. The slowdown in cloud computing echoed similar news received earlier in the week from both Microsoft
MSFT
, Google
GOOG
and Dropbox, who announced they’ll be laying off 500 workers. After initially surging in the afterhours session, shares of Amazon have since pulled back and are indicated down a little less than 2%.

Intel
INTC
is also out with earnings. The chipmaker reported the largest loss in company history as sales fell back to a level not seen since 2010. After surging during Covid, sales of PCs have slowed significantly. According to IDC, a firm that tracks PC sales, shipments were down 29% on a year-over-year basis. That in turn led to a 38% drop in Intel’s PC-chip division. However, in a call with analysts, Intel CEO Pat Gelsinger said the market for PCs was beginning to improve. In premarket trading, shares of Intel are up 5%.

Elsewhere, Exxon Mobil and Chevron
CVX
announced earnings. The companies posted record profits last year in the wake of Russia’s invasion of Ukraine. Despite this year’s profits being down 40% from a year ago, the combined companies reported $18 billion in first quarter profits. Shares of Exxon are indicated flat in premarket while Chevron is trading down 0.5%. Meantime, shares of Caterpillar lost nearly 2.5% on Thursday. That comes despite the company beating on both profits and revenues. Caterpillar shares are off by about 1% in premarket. Lastly, shares of Snap are set to open sharply lower following a dog water of a report as ad spending continues to weaken.

In total, 235 of the 500 companies in the S&P 500 have now reported. According to an article in today’s Wall Street Journal, based on reported earnings so far and estimates for remaining companies, first quarter earnings are on pace to fall over 4% from a year ago. However, reported earnings have managed to top expectations by 8% at this point. That drop in earnings also comes in the wake of the most recent GDP report that showed the economy grew 1.1% in Q1, down from 2.6% in the final quarter of last year.

For today, markets are bouncing around a bit in premarket trading. The latest reading on Personal Consumption Expenditures (PCE) was released this morning. Analysts were looking for an increase of 0.3% and that is exactly what they got. The PCE factors heavily into Fed decision making and with the Fed scheduled to meet next week, expectations are well above 80% for Powell and company to increase rates 0.25% next Wednesday. As always, I would stick with you investing plan and long term objectives.

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