By Geoffrey Smith
Investing.com -- It's perhaps the biggest day of the first quarter earnings season, reaching its climax after the close when Google parent Alphabet (NASDAQ:GOOGL) and Microsoft (NASDAQ:MSFT) report. Before then, there'll be updates from a cast of thousands including GE, GM and Pepsi. China's central bank put a floor under the yuan, and (sort of) stopped the rot in Chinese stock markets, for now at least. The American Petroleum Institute releases weekly crude and product estimates, and Elon Musk's acquisition of Twitter (NYSE:TWTR) continues to send shockwaves through both markets and Washington. Here's what you need to know in financial markets on Wednesday, 26th April.
1. Alphabet, Microsoft kick off Big Tech's 1Q
Big Tech’s earnings season kicks off (if you exclude Tesla (NASDAQ:TSLA)) with results from Google parent Alphabet and Microsoft after the closing bell.
Microsoft is expected to deliver another quarter of steady earnings growth, driven largely by its Cloud-hosting unit Azure. However, the more interesting release is likely to be Alphabet, whose advertising-driven model will be under scrutiny for evidence of impacts from inflation. Alphabet stock has fallen nearly 20% from its peak late last year, despite extraordinarily robust revenue growth.
Investors are also likely to scan the company’s comments for any read-across to its YouTube service from Netflix’s problems with market saturation, which may lead to the streaming giant competing with it for advertising.
2. PBOC promises more support; yuan stabilizes after FX reserve ratio cut
The Chinese central bank put a floor under the yuan and – up to a point, the local stock market – by saying it was looking at further ways to support the economy. The yuan, which has been falling at its fastest rate since the PBoC’s devaluation in 2015, ticked up against the dollar in response. The dollar fell 0.1% against the offshore yuan after hitting an 18-month high on Monday.
The central bank said it will “increase prudent monetary policy support to the real economy, especially for industries and small businesses hit hard by the pandemic,” a reference to the massive demand shock reverberating through Shanghai and other cities due to extensive lockdowns.
On Monday, the PBoC had also cut the reserve requirement it imposes on banks’ holdings of foreign currencies, increasing the availability of dollars on the local market.
3. Stocks set to open lower as bounce fades; earnings deluge underway
U.S. stocks are set to open lower later, unable to build on Monday’s solid bounce, which was driven by perceptions that the repricing of interest rate expectations had gone far enough.
By 6:20 AM ET (1020 GMT), Dow Jones futures were down 109 points, or 0.3%, while S&P 500 futures and Nasdaq 100 futures were down in parallel.
It’s a huge day for quarterly earnings, with United Parcel Service (NYSE:UPS) and Pepsico (NASDAQ:PEP) already out with better-than-expected results. General Electric (NYSE:GE), Raytheon (NYSE:RTN), Warner Bros Discovery (NASDAQ:WBD) and DR Horton (NYSE:DHI) are all due before the bell, while Visa (NYSE:V), Mondelez (NASDAQ:MDLZ), General Motors (NYSE:GM), Texas Instruments (NASDAQ:TXN) and Chipotle (NYSE:CMG) will join the tech giants in reporting after the close.
The data calendar meanwhile is dominated by durable goods orders, the Conference Board's consumer confidence survey, new home sales and house prices for March, while a two-year note auction will also provide interest in the debt markets.
4. Twitter aftershocks
Elon Musk’s agreement to buy Twitter continues to reverberate through both financial markets and Washington. The deal has been welcomed by conservative voices, who see the move as a welcome counterbalance to a liberal-dominated media landscape, while others (including the Washington Post, without any identifiable trace of irony) have railed against the purchase of an important mouthpiece by the world’s richest man. WaPo owner Jeff Bezos was not alone in wondering whether Musk would allow unfettered criticism of China, given how much Musk's Tesla (NASDAQ:TSLA) has at stake there.
Twitter founder Jack Dorsey said the move would “take Twitter away from Wall Street” and restore it to its original function.
Musk has however leaned heavily on Wall Street to get the money together for his acquisition. Morgan Stanley has organized some $12.5 billion in financing for the deal, secured against Musk’s holding in Tesla. Twitter stock, meanwhile, is still trading some 4% shy of the $54.20 agreed purchase price.
5. Oil consolidates around $100; API estimates due
Crude oil prices consolidated around $100 a barrel overnight, with the market still on tenterhooks with regard to Covid developments in China. Beijing districts have begun a week of mass testing, while Shanghai’s lockdown still continues.
By 6:30 AM ET, U.S. crude futures were down 0.2% at $98.39 a barrel, while Brent futures were up 0.1% at $102.25 a barrel, with the return of Libyan production helping to take the edge off prices.
The American Petroleum Institute will report its weekly estimate of U.S. crude and fuel stocks at 4:30 PM as usual.