Morning Wrap: ASX 200 to fall, S&P 500 fades early strength, Block shares plunge on earnings miss

ASX 200 futures are down 32pts (-0.39%) as of 8:30 am AEST.

In a nutshell:

• Major US benchmarks higher, with the S&P 500 logging an unprecedented eight-day win streak

• Despite another green day on Wall Street, most benchmarks faded from session highs and closed near worst levels

• Meta and Microsoft the latest tech titans to report better-than-expected earnings on both AI and non-AI related demand

• Block shares set to tumble double digits after quarterly earnings miss and full-year guidance downgrade

Let's dive in.

S&P 500 SESSION CHART

S&P 500 higher but closed near session lows (Source: TradingView)

OVERNIGHT MARKETS

• Major US benchmarks higher but finished near session lows after an abrupt last-minute selloff

• S&P 500 logged its eighth straight gain and on track for its first back-to-back weekly gain since January

• Mag-7 reporters (4 so far) have all topped earnings expectations, latest highlights include Microsoft’s 400 bp Azure growth acceleration to 35% year-on-year (vs. 31-32% guidance) and non-AI outperformance, Meta’s focus on its AI roadmap – notably advertising, engaging experience, Meta AI and AI devices

• Well-received earnings from big tech has boosted key S&P 500 first quarter earnings metrics, with blended growth rate now at 12.3% vs. market expectations of 7.2% 

• Investors expect little clarity Trump tariffs this month, pain trade still seen higher (BBG)

• Oil prices spike after US imposes further sanctions on Iranian oil-trading entities ahead of a new round of nuclear talks (RT)

STOCKS

• Meta Q1 revenue up 16% (beating ests by 2.2%), announced 2025 capex range of $64-72bn, up from earlier estimates (BBG)

• Microsoft shares jump on 13% revenue growth to $70.0bn, Azure cloud unit saw 33% revenue gain, with expectations to accelerate to 34-35% in the current quarter (BBG)

• GM expects $4-5bn tariff hit, even after recent relief (AX)

• Moët Hennessy to cut 10% of workforce amid luxury slowdown (FT)

• Qualcomm quarterly revenue up 18% to $9.4bn, marginally ahead of consensus but next quarter guidance of $10.3bn falling 0.5% short of analyst expectations amid concerns about tariffs (BBG)

• Starbucks looking to reduce its store remodel costs, currently ~$1m and exploring new refresh stores for $150,000 or less (BBG)

• Robinhood saw increased revenue as retail investors flocked amid Trump's tariffs, despite slowing crypto growth (RT)

CENTRAL BANKS

• Fed expected to keep rates steady despite market bets on almost four rate cuts by year end (RT)

• BOJ keeps interest rate steady, cuts growth and price forecasts on tariff worries (BBG)

• Bank of England forecast to cut four times by year end (BBG)

TARIFFS

• US has reached out to China to initiate tariff talks, according to China's state-run media (BBG)

• Trump says he has 'potential deals' with India, South Korea, Japan but calls China the 'chief-ripper-offer' on trade (RT)

• Almost half of US toymakers say Trump's 145% tariffs on goods imported from China will put them out of business within months (BBG)

• EU to present new trade proposals to US negotiators that will propose lowering trade and non-tariff barriers (BBG)

ECONOMY

• US April ISM Manufacturing Index prints 48.7 (ests: 48.1), report noted lower demand and production, destaffing trends, while price growth ticked higher due to tariffs (BBG)

ASX TODAY

• Block reports Q1 EPS of $0.56 (vs. $0.97 ests or 42% miss), Q2 guidance 3-4% below market expectations, full-year gross profit guidance cut by 2.5% to $9.96bn as management flag a “more dynamic macro environment” (XYZ)

• Kingsgate to undertake on-market share buy-back of an undetermined size for 12 months from 12-May-25 (KCN)

• Qube Holdings reaffirms FY25 guidance of underlying NPATA and EPS growth of 5% year-on-year (QUB)

• ResMed acquires VirtuOx, an independent diagnostic testing facility for sleep and respiratory conditions, financial terms not disclosed (RMD)

• Rio Tinto shareholders vote 80.65% against independent review of DLC structure (RIO)

• Wisetech in discussions to acquire NYSE-listed supply chain platform provider e2open for up to $3.5bn (AFR)

WHAT TO WATCH TODAY

• Fading action: Not the strongest overnight session, with most benchmarks closing near worst levels. After the sheer amount of strength we've seen in the past week, it wouldn't be surprising to see the market take a breather.

• Gold: Gold is on a three-day losing streak, down 3.1%. I've seen some articles about China either dumping gold stockpiles or a pause in Chinese demand. This is taking the heat out of soaring gold miners, with the Gold Miner ETF (GDX) down 3.6% overnight to the lowest level since April 10.

• Block: NYSE-listed Block shares currently down around 18% in after hours. Its result flagged a broad miss including sharp Q1 EPS miss, soft Q2 guidance and 2-9% downgrade for most full-year numbers. Its a very large gap down, which might cap any further downside.

BROKER MOVES

• Computershare downgraded to Sell from Neutral but target up to $39 from $37.40 (UBS)

• Sigma Healthcare initiated Overweight with $3.45 target (MS)

Stocks trading ex-dividend: 

• Fri 2 May: None

• Mon 6 May: Acorn Capital Investment Fund (ACQ) – $0.028

• Tue 7 May: Resmed (RMD) – $0.058

• Wed 8 May: Future Generation Australia (FGX) – $0.035

Other ASX corporate actions today: 

• Dividends paid: Waterco (WAT)

• Earnings: None

• AGMs: Iluka Resources (ILU), Iress (IRE)

Economic calendar (AEST):

• 11:30 am: Australia Producer Price Index (MAR)

• 11:30 am: Australia Retail Sales (MAR)

• 7:00 pm: Eurozone Inflation Rate (APR)

• 10:30 pm: US Unemployment Rate (APR)