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Ahead of a Federal Reserve meeting and major corporate earnings, stocks saw gains on Monday, with the S&P 500, Nasdaq Composite, and Dow Jones Industrial Average rising by 0.32%, 0.35%, and 0.38% respectively. Tesla's shares surged 15% following the approval of its advanced driver-assistance technology in China, while Apple climbed 2.5% after an upgrade from Bernstein, just before its earnings announcement on Thursday. Market watchers are set to keenly observe post-market earnings today from major companies including Amazon, Advanced Micro Devices, and Starbucks.
Amazon's Earnings Spotlight
Amazon is poised to capture investors' attention with its forthcoming earnings release scheduled for Tuesday after the market closes. The spotlight will shine on Amazon's AWS cloud computing division, which is slowly rebounding from a decline in client expenditures. With an eye toward reigniting demand, AWS is integrating more AI-driven features into its services. This strategic move aligns with efforts by other tech giants like Meta, Alphabet, and Microsoft, who have also ramped up investments in AI to enhance profitability and sales metrics.
Overall, Amazon is expected to show robust returns for the first quarter. Analysts suggest that stable online consumer spending and the introduction of advertising on its Prime Video service likely buoyed the company’s financial performance. Additionally, ongoing cost reductions, including further layoffs at AWS and adjustments to its U.S. logistics operations, may bolster profit margins.
| Metric | Q4 Expected | Q1 2023 |
|---|---|---|
| Revenue | $142.6 billion | $127.4 billion |
| Adjusted Earnings Per Share | $0.82 | $0.31 |
| Online Stores | $54.8 billion | $51.1 billion |
| Amazon Web Services | $24.1 billion | $21.4 billion |
| Advertising | $11.8 billion | $9.5 billion |
McDonald’s Mixed Results
McDonald’s reported mixed results, with revenues slightly exceeding expectations but earnings per share falling short. Economic pressures are evident as lower-income U.S. consumers reduce spending. Internationally, the company faced challenges in the Middle East due to boycotts and temporary store closures, stemming from its Israeli licensee's promotions for soldiers. These factors collectively dampened McDonald's performance outside the U.S.
| Category | Reported | Expected |
|---|---|---|
| Earnings per share | $2.70 adjusted | $2.72 |
| Revenue | $6.17 billion | $6.16 billion |
| Q1 Net Income | $1.93 billion, or $2.66 per share | N/A |
| Pretax Charge | $35 million | N/A |
| Net Sales Growth | 5% | N/A |
| Global Same-Store Sales | 1.9% | 2.1% (Estimate) |
| U.S. Same-Store Sales | 2.5% | 2.6% |
| International Developmental Licensed Markets Same-Store Sales | -0.2% | N/A |
| International Operated Markets Same-Store Sales | 2.7% | N/A |
| France Same-Store Sales | Declined | N/A |
HSBC Leadership Transition
HSBC announced the impending retirement of CEO Noel Quinn after a tenure marked by significant strategic shifts within the bank. Quinn, a veteran of 37 years at HSBC, will remain in his role until a successor is appointed. His leadership was instrumental in streamlining operations and refocusing on core consumer banking markets in Europe and Asia. These initiatives have substantially improved HSBC’s financial health, as evidenced by strong earnings and enhanced cash and capital positions over recent years.
Oil Prices Stable Amid Geopolitical Tensions
In European trading on Tuesday, oil prices showed little change as the market’s focus turned to ceasefire negotiations between Israel and Hamas. Reports indicate that Israel proposed a 40-day ceasefire, with further discussions ongoing in Egypt. A potential ceasefire could reduce geopolitical risk, impacting oil trading dynamics. Meanwhile, anticipations of persistent high U.S. interest rates are also influencing market sentiment as investors await the Federal Reserve’s next moves.
Walmart introduced a new grocery brand
Walmart introduced a new grocery brand called BetterGoods on Tuesday, offering trend chef-driven foods under a private label, with most items priced below $5. This strategy enhances Walmart's reputation for affordability, especially as consumers grapple with high inflation. As the largest U.S. grocer by revenue, Walmart reported that groceries accounted for about 60% of its domestic sales in the latest fiscal year.
