Meta plunges after hours, focus on Microsoft and Alphabet

Headlines

* Meta plummets 11% despite Q1 earnings beat as Q2 outlook disappoints

* US economy expected to grow 2.5% in Q1, “not a hard landing, hardly soft”

* Intervention risks rise as USD/JPY advances through 155

* Microsoft, Intel and Alphabet, Google’s parent, release earnings after US close

FX: USD printed a narrow range day with most trading within the range of the prior day. The DXY continues to trade around 106. US durable goods were mixed if you looked beyond the small beat on the headlines. The core figure printed at half the pace of the previous month. Eyes are on GDP released later today. The recent top is at 106.51.

EUR was little changed closing just below 1.07. Tuesday’s upside breakout came on the back of business activity expanding at its quickest pace in nearly a year. The German IFO business survey came in on the hot side. Near-term resistance is 1.0712, a major Fib level of the Q4 rally.

GBP traded in narrow range, eking out small gains. Markets were digesting BoE Chief Economist Pill’s more hawkish comments made recently. He said rate cuts remain a way off, in contrast to more dovish speak from Governor Bailey. The midpoint of the Q4 cable rally is at 1.2465.

USD/JPY hit more multi-decade peaks. Prices hit 155.35, the weakest yen since mid-1990, and closed on their highs. Many JPY watchers think intervention is imminent. But we do get Tokyo CPI and the BoJ meeting on Friday. A top is really needed in US Treasury yields to halt the ramp up, but US Core PCE inflation data is expected to remain solid and keep USD bid. Focus will then be on the FOMC meeting and NFP next week. That said, the pace of the currency move may be more important than a specific level. A 10 yen move over a month is reckoned to be rapid.

AUD traded up to a high of 0.6529, very close to the 50-day SMA, after stronger than expected CPI data. That put the odds of an RBA rate cut this year below 30%.   USD/CAD halted its five-day sell-off with the major moving above 1.37. March retail sales missed estimate, highlighting the weak consumer backdrop in Canada.

Stocks: US equities were choppy amid Big Tech earnings and the short squeeze in Tesla. The earnings backdrop in general has tallied with a broader picture of growth staying solid. The broad-based benchmark S&P 500 finished 0.02% higher at 5071. The tech-dominated Nasdaq 100 added 0.32% to close at 17,527. The Dow Jones underperformed again, losing 0.11% to settle at 38,461. Tesla jumped 12% as investors clung to Elon Musk’s comments about making less expensive EVs. Metrics disappointed but the promise of more affordable cars eased some growth fears. Prices are back above long-term support at $152.37 but on long-term trendline resistance. Meta issued better than expected results after the US close. But the stock fell sharply on a light revenue forecast. The stock was up around 40% on the year but is down over 11% after hours.

Asian Stocks: APAC futures are in the red. Markets traded positively after the strong lead Stateside. The ASX 200 was boosted by gold miners after numerous quarterly production updates. But better than expected CPI capped gains. China indices were in the green with tech strength in Hong Kong. But the upside was stalled by the passing of the US Taiwan aid package and possible TikTok ban in the US. The Nikkei 225 outperformed, moving above 38,000 on tech strength.

Gold traded in a small range after the sharp sell-off on Monday and modest fightback after more selling Tuesday. Prices are trading around the first Fib level (23.6%) of this year’s rally at $2326.

Day Ahead – US GDP

US growth in the first quarter is estimated to cool to 2.4% from 3.4% in the final quarter of last year. Expectations have gradually risen with stronger March retail sales likely to lift consumer spending. US ISM data has been mixed with services in expansionary territory and manufacturing yo-yoing around the 50 boom/bust line.

GDP as a major activity indicator could prompt some volatility. But the kind of big repricing in Fed expectations that we saw earlier this month will probably only be triggered by lower inflation, soft employment figures or Fed communication. PCE inflation on Friday will be key, with the FOMC meeting on 1 May, and NFP data on 3 May. Markets price in only 40bp of rate cuts this year.

Chart of the Day – Microsoft bounces off support zone

MSFT remains the only megacap tech stock with a market cap above $3 trillion. Bulls are hoping for an upbeat earnings report when results are released after today’s US close. Deal strength and growth in the Azure cloud-computing business of around 30% are predicted. Momentum is forecast in the next 12 months due to more Azure cloud deal flow, as adoption of AI and Copilot activity ramps up.

The stock is up around 9.5% this year after coming off its highs above $430 in March. Prices dipped through the 50-day SMA at $413.59 last week and hit the 200-day SMA at $400.19. But Microsoft bounced off this important indicator and a Fib retracement level (23.6%) at $402.11 and is up every day this week.

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