Alphabet shares plunged almost 10% in evening trading after its quarterly report. Alphabet is Google's parent company. On the morning of October 29, the sell-off dragged Nasdaq 100 futures to 29,620 points.
An index future is a contract on its future value. Futures show the market's mood even before the main session opens.
For a trader, the takeaway is simple. One large company's report can turn the entire tech index around in an evening.
Where did the indices diverge?
- Nasdaq 100 -1.2% - 29,620 points.
- S&P 500 -0.38% - 7,750 points.
- Dow Jones +0.37% - 52,890 points.
This is the picture at the open of the European session. It is the tech sector that is under pressure, not the market as a whole.
Why did Alphabet fall?
The reason is specific. Google Services revenue for the third quarter came in at $96.3 billion versus an expected $98.4 billion.
- Advertising - ad revenue grew at its slowest pace in the last five quarters.
- AI spending - investors are worried about whether the growing investment in artificial intelligence will pay off in time.
What happened in Asia?
The next blow came from Asia. Samsung Electronics -5%: profit at its chip division came in below optimistic forecasts, and the company postponed a new shareholder payout plan.
- KOSPI -1.2% at the close; during the session the index fell almost 3%.
- CSI 300 -1.2% and Shanghai Composite -0.93% are also in the red.
- Nikkei +0.66% and ASX 200 +0.45% closed higher.
Who saved the earnings season?
Microsoft +3% in after-hours trading. The company's cloud revenue grew 48% year over year versus expectations of 44%.
If you trade indices around earnings, it makes sense to pick a challenge that suits your style in advance.
Key point: according to Deutsche Bank strategists, Microsoft's strong report did not outweigh the disappointment from Alphabet and Samsung. An index's direction is set by the sum of reports, not by any single one.
What's next?
- Amazon and Intel reports. They come next on the earnings calendar.
- PCE data. This is the personal consumption expenditures index, the Fed's main inflation gauge. Publication dates are in the economic calendar.
- The Fed rate. The day before, the regulator left it at 3.75-4.00%.
Europe is trading without direction. The Stoxx 600 and FTSE 100 are hovering around zero, while Spain's IBEX is down 1.45%.
Have you watched one report drag an entire index down?
An earnings evening always looks the same: you sit in front of the chart and watch one stock pull Nasdaq down by more than a percent. You're reading the market correctly. The only question is that a 1.2% index move on an account of a couple thousand dollars is the cost of dinner, not a result. Prop trading solves exactly the arithmetic: you pass a paid evaluation and trade the company's trading notional for a share of the profit. Amazon and Intel report next.