Image Source: Unsplash
 

This afternoon provided the biggest reverberations to today’s stock market, sending major indexes falling into negative territory upon the latest monetary policy from the Federal Open Market Committee (FOMC), whereby the Fed cut interest rates by 25 basis points (bps), to a range of $3.75-4.00 for the first time in three years. The Nasdaq and the S&P 500 rebounded somewhat, but the small-cap Russell 2000 fell off further.

“December Rate Cut Not a Foregone Conclusion — Far From It”
 

This was the quote most observers of Fed Chair Jerome Powell’s press conference picked up on, as markets have advanced largely — as argued in this column, as well — on the assumption that another 25 bps cut is in the cards for the next FOMC meeting on December 16th. Powell insists the Fed’s decisions will be data-driven (even if much of that data remains unavailable with the federal government shut down).

However, we note the “dot plot” from the Fed’s September meeting includes three 25 bps cuts: September, October and December (there is no November meeting), and based on Powell’s assessment of the current economy — a moderate expansion overall, with consumer spending holding up well — we don’t see anything outside of a major calamity that would cause the Fed to erase the December “dot.”

Perhaps unforeseen with so much focus on interest rates is the new move for the Fed to stop balance sheet runoffs as of December 1st. It’s been more than 40 months of expiring mortgage-backed securities rolling off, and Powell now sees ample reserves in place, without drawing them down too far. Going forward, expiring securities will be reinvested as T-bills, which have a shorter holding duration, as well.

Earnings Report Overview After the Close: MSFT, GOOGL, META & More
 

Microsoft (MSFT - Free Report) outperformed expectations on both top and bottom lines in its fiscal Q1 report this afternoon. Earnings of $4.13 per share on revenues of $77.67 billion, easily surpassing the $3.65 per share and $74.96 billion estimates, respectively. Azure Clouds revenue grew +40% year over year, higher than projections but perhaps not quite as robust as the “whisper number.” Shares are down -2.6% in late trading, +28.5% year to date.

Google parent Alphabet (GOOGL - Free Report) saw shares in late trading zoom up +6% on its Q3 report out after the closing bell. Earnings of $2.87 per share included a one-time $3.5 billion charge and still outpaced the $2.26 estimate, on $87.47 billion in revenues (minus Traffic Acquisition Costs [TAC]; the company reported $102.35 billion on its top line), which bettered the $84.96 billion estimated. Cloud growth outperformed expectations to +15.16 billion in the quarter.

Meta Platforms (META - Free Report) also beat expectations this afternoon in its Q3 report today, with earnings of $7.25 per share nicely outperforming the $6.61 in the Zacks consensus on revenues of $51.24 billion — nicely beyond the $49.45 billion anticipated. Average Price per Ad reached +10, which was a smidge lower than analysts had anticipated. Daily Active People outperformed expectations again: 3.54 billion versus 3.49 billion estimated.

ServiceNow (NOW - Free Report) shares are up +3% in late trading after scorching estimates in its Q3 report this afternoon: earnings of $4.82 per share was well ahead of the $4.21 expected, on revenues of $3.41 billion improved over the $3.35 billion forecast. CEO Bill McDermott said the company is able to upgrade forward guidance “substantially.”

Starbucks (SBUX - Free Report) missed on its bottom line in fiscal Q4 by 3 cents per share to 52 cents, while revenues of $9.6 billion came out ahead of the $9.33 billion analysts had been looking for. Comps improved +3% in its International markets (minus China), while China gained +2% and North Americas was flat. Shares had been up on the release, but are -1% now.

More By This Author: