Market Wraps

Morning Wrap: ASX 200 to fall, S&P 500 tumbles on disappointing Alphabet earnings

Thu 26 Oct 23, 8:38am (AEDT)

ASX 200 futures are trading 18 points lower, down -0.26% as of 8:20 am AEST.

Major US benchmarks tumbled amid worries Google-parent Alphabet losing ground in the cloud and AI space, oil prices eased for a fourth consecutive session as disruption fears ease, Microsoft tops earnings expectations with solid cloud growth, Visa isn't seeing any impacts from inflation and student loan repayments and a closer look at quarterly results from Pilbara Minerals and Sandfire Resources.

Let's dive in.

Overnight Summary

Thu 26 Oct 23, 8:25am (AEDT)

Name Value % Chg
Major Indices
S&P 500 4,187 -1.43%
Dow Jones 33,036 -0.32%
NASDAQ Comp 12,821 -2.43%
Russell 2000 1,651 -1.67%
Country Indices
Canada 18,948 -0.20%
China 2,974 +0.40%
Germany 14,892 +0.08%
Hong Kong 17,085 +0.55%
India 64,049 -0.81%
Japan 31,270 +0.67%
United Kingdom 7,414 +0.33%
Name Value % Chg
Commodities (USD)
Gold 1,991.2 +0.02%
Iron Ore 118.19 -
Copper 3.5865 +0.01%
WTI Oil 85.29 +0.04%
AUD/USD 0.6312 +0.05%
Bitcoin (AUD) 54,945 +3.12%
Ethereum (AUD) 2,833 +0.69%
US 10 Yr T-bond 4.953 +2.33%
VIX 20.19 +6.43%

US Sectors

Thu 26 Oct 23, 8:25am (AEDT)

Utilities +0.48%
Consumer Staples +0.33%
Energy -0.16%
Financials -0.30%
Health Care -0.90%
Materials -1.14%
Information Technology -1.19%
Industrials -1.27%
Real Estate -2.07%
Consumer Discretionary -2.40%
Communication Services -5.89%


S&P 500 intraday
S&P 500 lower and finished near worst levels (Source: TradingView)


  • S&P 500 lower and finished near worst levels after snapping a five-day losing streak on Wednesday

  • Alphabet (-9.5%) was the major drag after its cloud revenue missed expectations

  • Another backup in yields amid resilient economic data, increased supply of Treasuries, fears around sticky inflation after Australia’s hotter-than-expected CPI print

  • Big Tech giants deliver mixed results in latest earnings reports (Reuters)

  • Wall Street heavyweights predict peak in Treasury yields after 5% mark (Reuters)

  • Bill Ackman pockets US$200m from short US Treasury bet (FT)

  • Oil falls for fourth consecutive day as supply disruption fears ease (Bloomberg)


  • Visa profit beats estimates on post-pandemic travel boost (Reuters)

  • US orders Nvidia to halt certain AI chips to China immediately (Nikkei)

  • UFC signs major sponsorship agreement with ABI InBev and Bud Light (Bloomberg)

  • Apple raises subscription prices for TV+, Arcade and News+ (Bloomberg)

  • Shell cutting 200 clean energy jobs and downsizes hydrogen business (CNBC)

  • GM and Honda scrap plan for JV to develop affordable EVs (CNBC)


Microsoft (+3.1%): Double beat, cloud metrics impressed, plus strong guidance. 

  • Cloud and Azure growth: "Microsoft Cloud revenue was US$31.8bn and grew 24% and 23% in CC, ahead of expectations… [In 2Q24] Azure, we expect revenue growth to be 26% to 27% in CC with an increasing contribution from AI."

  • Azure taking market share: “Azure again took share as organisations bring their workloads to our cloud. We have the most comprehensive cloud footprint with more than 60 data center regions worldwide…”

  • Teams is exploding: "We have seen 9 consecutive quarters of triple-digit revenue growth for Teams Rooms, and more than 10,000 paid customers now use Teams Premium.”

  • Investing in AI: "We expect capital expenditures to increase sequentially on a dollar basis driven by investments in our cloud and AI infrastructure.”

Visa (+0.9%): Double beat, authorised a new US$25bn share buyback program and raised quarterly dividend.

  • State of the consumer: "Consumer spend across all segments from high to low spend has remained stable since March. Our data did not indicate any behaviour change across consumer segments.”

  • No meaningful impacts: “We are also not factoring in any impacts from rising inflation and student loan repayments because, as I mentioned before, we have yet to see any meaningful impact.”

Alphabet (-9.6%): Double beat but cloud computing profits of US$266m missed analyst estimates of US$434m due to customer cost cutting. This marks Alphabet’s 4th worst session in history and shaving approximately 18 points (30% of today’s decline) off the S&P 500.

  • Top-line growth returns to double digits: "The fundamental strength of our business was apparent again in Q3, with US$77bn in revenue, up 11% year-on-year driven by meaningful growth in Search & YouTube & momentum in Cloud.”

  • Decelerating cloud growth: Revenue for the quarter was US$8.4bn, up 22% vs. growth rates of more than 50% in 2020-21. Operating margins fell to 3.0% from 4.9% in the previous quarter

  • Ad recovery :Search and Youtube advertising revenue stabilised in the third quarter after negative growth rates  in 3Q22-1Q23.

  • Capex: "Our reported CapEx in Q3 was US$8bn, driven overwhelmingly by investment in our technical infrastructure with the largest component for servers, followed by data centres, reflecting a meaningful increase in our investments in AI compute."


  • European money markets brace for tighter ECB bank regulations (Bloomberg)

  • ECB convenes amid bond market turmoil and economic downturn (CNBC)

  • Bank of England rate decision on knife-edge (Telegraph)

  • China money markets suggest even more PBOC support required (Bloomberg)


  • China's top diplomat Blinken both aim to calm Middle East situation (Nikkei)

  • World leaders seek pause to Israel-Hamas fighting to allow aid into Gaza (Reuters)


  • Ex-official urges China to embrace major reforms for economic revival (SCMP)

  • China stimulus package leans on debt and state spending (Reuters)

  • China stimulus to boost new areas of the economy while avoiding funneling money into troubled property sector (Bloomberg)

  • China developer Country Garden defaults on dollar bond for first time (Bloomberg)


  • German business sentiment improves but recession fears remain (Reuters)

  • Bank of Canada leaves rates on hold, flags weak growth, stubborn inflation (Reuters)

  • Australia quarterly CPI hotter-than-expected, raises likelihood of rate hike (AFR)

Industry ETFs

Thu 26 Oct 23, 8:24am (AEDT)

Name Value % Chg
Uranium 26.45 +0.69%
Silver 20.94 -0.38%
Steel 60.9833 -0.67%
Copper Miners 33.17 -1.40%
Strategic Metals 58.02 -1.49%
Gold Miners 28.78 -1.64%
Lithium & Battery Tech 48.34 -2.83%
Aerospace & Defense 107.73 -0.19%
Agriculture 21.81 -0.46%
Construction 46.69 -1.50%
Global Jets 14.87 -1.78%
Biotechnology 115.11 -1.91%
Cannabis 5.37 -4.79%
Name Value % Chg
Bitcoin 17.74 +3.26%
Hydrogen 6.22 -2.96%
Solar 42.64 -3.66%
CleanTech 9.19 -3.67%
Electric Vehicles 21.2 -2.26%
Robotics & AI 22.74 -2.53%
Video Games/eSports 50.05 -2.60%
E-commerce 16.78 -2.89%
Cybersecurity 22.88 -3.46%
Cloud Computing 17.71 -3.49%
Sports Betting/Gaming 14.4382 -3.71%
Semiconductor 442.23 -4.04%
FinTech 18.72 -4.05%

Pilbara Minerals September Quarter

Pilbara Minerals (ASX: PLS) dropped its September quarter report this morning and the numbers were quite soft vs. consensus expectations.

  • Production of 144.2kt, down 2% and below the 159.4kt expected

  • Unit operating cost of $747 a tonne, up 18% and below the $609 expected

  • Realised prices of US$2,240 a tonne, down 47%

  • Cash balance of $3.0bn, up 121%

The higher costs reflected "operational readiness costs in support of the P680 expansion project and lower production volume relative to Q4 FY23."

Last month, Macquarie retained an Outperform rating on PLS with a $7.30 price target. One of my key issues with Macquarie is that the analysts assumed an average spodumene price of US$5,000 for FY24. So either the above price doubles by financial year end. Or maybe its more logical to halve Macquarie's price target?

2023-10-26 08 31 46-Window
Pilbara Minerals 12-month price chart (Source: Market Index)

Sandfire Resources September Quarter

Sandfire (ASX: SFR) reported some fairly strong production numbers this morning for the September quarter.

  • Copper production up 44% QoQ to 22,987 tonnes vs. the 21,100 expected

  • C1 cost of US$2.04/lb vs. the US$1.85/lb expected

  • Motheo copper implied C1 unit cost of $1.65/lb

FY24 Group production and cost guidance was unchanged and all in-line with analyst expectations.

2023-10-26 08 32 06-Window
Sandfire Resources 12-month price chart (Source: Market Index)

Will Good News be Bad News?

US third quarter GDP data is due tonight and the street is expecting:

  • BofA: We expect Q3 GDP growth to come in at 4.5% tomorrow, with broad-based strength across components.

  • Goldman Sachs: “We boosted our Q3 GDP tracking estimate by one tenth to +4.7%."

  • Atlanta Fed GDPNowcast: Latest estimate of 5.4% for Q3

This will mark the fastest pace of growth since the fourth quarter 2021 post-pandemic peak. Could we continue to see this good news is bad news dynamic play out? Where a strong GDP print props up yields, oil and the US dollar (and weakens equities)?

Key Events

ASX corporate actions occurring today:

  • Trading ex-div: Bank of Queensland (BOQ) – $0.21, Morphic Ethical Equities Fund (MEC) – $0.03, Acrow Formwork and Construction Services (ACF) – $0.02 

  • Dividends paid: A2B Australia (A2B) – $0.05, Ridley Corp (RIC) – $0.04, Australian Unity Office (AOF) – $0.01

  • Listing: None

Economic calendar (AEDT):

  • 9:00 am: RBA Bullock Speech

  • 11:15 pm: ECB Interest Rate Decision

  • 11:30 pm: US Durable Goods Orders 

  • 11:30 pm: US Q3 GDP

  • 11:45 pm: ECB Press Conference

Written By

Kerry Sun

Content Strategist

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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