Tech Shares Gain on Google Earnings, Stock Split as Other Indexes Waver

Tech stocks on the Nasdaq are rising, led by big gains from shares of Google parent Alphabet Inc. (GOOG) after the company posted strong earnings and announced a 20-for-1 stock split. The Dow Jones wavered and S&P 500 gained. 

The indexes rose yesterday in another choppy day of trading, as markets reacted to earnings. So far, more than 36% of the S&P 500 companies have reported results, with more than 78% topping analyst expectations. Among the companies reporting earnings today are Facebook parent Meta Platforms, AbbVie Inc. (ABBV), Marathon Petroleum Corp. (MPC), Qualcomm Inc. (QCOM), Sony Group Corp. (SONY), D.R. Horton Inc. (DHI), and T-Mobile US Inc (TMUS). 

The labor market is also in focus, as ADP releases its National Employment Report for January. Private-sector employment is projected to increase by 215,000 jobs in January, after 807,000 jobs were added in December. 

adp

The ADP data comes ahead of the Labor Department’s release of the government’s January jobs data on Friday, which is expected to show the U.S. added 150,000 new positions after a gain of 199,000 in December. The unemployment rate is expected to be unchanged at 3.9%. 

Oil prices rose as the U.S. announced it's sending 3,000 troops to Germany, Poland, and Romania amid a standoff with Russia and the Ukraine. The yield on the 10-year bond rose, the dollar weakened against the euro, and cryptocurrencies were little changed.

Today's Headlines: Quick Hits

The U.S. national debt passed $30 trillion for the first time ever. The rise has been stoked by trillions of dollars of spending on programs for pandemic aid to businesses and workers.

Pfizer Inc. (PFE) is asking the FDA to authorize its COVID-19 vaccine for children under five years of age. If approved, the shots could become available for young children as soon as March.

Shares of Advanced Micro Devices Inc. (AMD) are soaring after forecasting a strong outlook for the rest of the year. The chip company beat analyst earnings estimates, and predicted its sales will reach over $21 billion this year, led by strong growth in gaming consoles.

Starbucks Corp. (SBUX) missed earnings estimates and said it was raising prices to offset inflation and rising labor costs. COVID-19 lockdown policies in China hit sales for the coffee chain, which tumbled 14%.

PayPal Holdings Inc.'s (PYPL) stock price is plunging as its earnings missed expectations and offered disappointing guidance for the next quarter. For 2022, PayPal forecast earnings that were roughly 10% below what analysts had expected.

Goldman's (GS) U.S.-based staff returned to the office for the first time this year. Rival banks are set to follow in the coming days as COVID-19 cases drop. 

Home Depot Inc. (HD) said it would hire more than 100,000 workers as the retailer gears up for its spring selling season, when demand for home-improvement products is at its peak. The company has typically hired around 80,000 workers for spring over the past years.

Cloud Wars: The Big Story

Google parent Alphabet reported better-than-expected profits and revenues, investors are watching closely for Alphabet’s progress in the cloud wars against the dominant players in cloud, Amazon Inc. (AMZN) and Microsoft Corp (MSFT). 

As part of the earnings announcement, Google said it posted cloud revenue of $5.5 billion, slightly higher than expectations, and up 45% from a year ago. Google’s cloud business is currently subsidized by its ad business, but the company is pushing for multi-cloud usage by businesses. Google Cloud posted an $890 operating loss, which was narrowed from a loss of $1.1 billion a year ago. 

Google currently accounts for just 6% of the cloud market, while Amazon’s AWS dominates with 41%, and Microsoft’s Azure holds roughly 20% of the market. Helping to boost Google’s cloud sales in the fourth quarter was an equity stake in the CME Group in exchange for long-term contracts.  

Google is also pushing customers to sign up with multiple vendors to lower costs and create more competition. That is opening up opportunities for Google and other smaller cloud players like Oracle Corp. (ORCL) and International Business Machines Corp (IBM). 

Companies like Experian PLC and AT&T Inc. (T) have been stitching together a network of vendors that include Microsoft, Google, and others.

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