FTSE 100 holds up ahead of US jobs numbers as Apple, Amazon and Alphabet disappoint

“Despite the blow to sentiment from disappointing tech earnings overnight, the FTSE 100 managed to eke out some gains early on Friday,” says AJ Bell Investment Director Russ Mould.

“It helped that Shell was still basking in the glow of its record results and big share buyback announced yesterday. For now, investors seem willing to put any concerns about any longer-term political consequences of the numbers to one side.

“Also supporting the index was weakness in the pound as currency traders bet that we are close to the peak for UK interest rates after yesterday’s meeting in Threadneedle Street. The fact the Monetary Policy Committee was split on the decision to bump rates to 4% felt instructive.

“Futures are pointing towards weakness on Wall Street later, reversing the gains it made before the after-hours shockers from Apple, Amazon and Alphabet, and this will be a test of the FTSE 100’s resilience.

“US jobs numbers are set to be released Friday afternoon with investors looking for a Goldilocks set of figures which are neither so weak they raise the sceptre of a severe recession nor so robust they suggest the jobs market is still running too hot for the Federal Reserve to pursue the hoped-for softening of its stance on interest rates.”

Apple, Amazon, Alphabet, Meta

“It’s been quite a week for investors as markets rallied hard thanks to the Federal Reserve indicating there may only be two more interest rate hikes to come in the current cycle. Glimpses of blue skies put even more confidence in the market, extending a rally that’s been in motion for much of the year so far.

“Sadly, the big tech companies have ruined the party by disappointing the market with their latest quarterly results. Meta aside, there was enough from Amazon, Alphabet and Apple to cause their share prices to fall in after-hours trading on Thursday, which explains why pre-market indicative prices show a down day for US indices on Friday.

“Meta was the big positive surprise as few people thought it would be the bearer of good news. Concerns over online advertising demand, regulatory pressures, and growing fears that it is wasting big money on the metaverse have weighed on Meta’s share price for the past year or so. Sentiment was mixed leading up to its latest quarterly results. But the shares soared after it subsequently announced better than expected sales, cost saving measures and a $40 billion share buyback.

“The other three big tech firms issued worrying news of various degrees, with the respective share price falls seemingly an accurate reaction to the severity of the situation.

“Amazon’s shares fell most in after-hours trading (-5.2%) as its results contained the biggest worry. Cloud computing has been the growth driver for profits in the business and news of softer demand is a concern. The company talked about customers cutting their budgets and trying to find ways to trim spending in cloud services. That suggests a difficult period ahead for the group as its fortunes are judged much more these days on cloud activity rather than retail.

“Alphabet makes its money from digital advertising and search and is vulnerable going into an economic downturn from businesses scaling back promotional spending. While many people do not believe we’ll see that serious a recession, weaker sentiment among corporates has been enough to already feed into lower spending on digital advertising.

“Alphabet will be hoping the drop in business and consumer confidence is at or close to the trough and advertising spend soon starts to pick up. Its shares fell 4.6% in after-hours trading, which suggests that investors remain nervous near-term.

“The fact Apple has suffered production issues for the iPhone is old news, which might explain why its share price fell by the least amount (-3.2%) of the trio of tech firms.

“While earnings disappointed, there are plenty of positives for the business. Production issues have been sorted out and Apple has a potentially large tailwind in the coming months in the form of China’s economic reopening. More freedom for the public to move around and greater business activity could fuel greater demand for Apple’s products in the country.

“It’s also worth noting that Apple’s services business hit an all-time revenue record of $20.8 billion. This is a key part of the Apple investment case – it makes money from selling products and then collects a regular stream of subscription payments afterwards as people are plugged into its ecosystem, paying for things like music and film streaming and fitness activities.”

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