Summary:
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US indices trading in the green ahead of the opening bell
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US500 and US30 hit new 2-month highs but US100 lagging
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Google shares called to open lower despite earnings beat
There’s been further gains seen in the US indices ahead of the cash open with all the benchmarks set to begin higher from the opening bell. Both the US500 and US30 have hit 2-month highs in recent trade as they’ve moved up to levels not seen since the beginning of December, but the US100 is yet to follow them above Monday’s highs. The reason for the relative lagging is likely due to the reaction seen in stock of Google’s parent company Alphabet (GOOGL.US on xStation), with the US100 more heavily weighted to tech stocks than its peers (the newly launched USFANG has an even greater weighting to Google than the US100 but due to it not opening yet we have yet to see a market reaction there.)
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The US100 was looking to march higher yesterday but got a firm rejection after Google reported its latest results. Price has since attempted to recover and 6980 could now be seen as possible resistance. Source: xStation
Turning our attention to the results from Google, at first they appear pretty good with both revenue and earnings topping analysts forecasts, but a fall in advertising margins has seemingly outweighed this. As you can see from the market reaction in the US100 the initial move in Google after hours was to the upside as traders rushed to buy on news that fourth quarter earnings per share had smashed forecasts ($12.77 vs $10.82) while revenue also topped expectations ($39.28B vs $38.93B).
However the cost per click on Google properties, a measure which can be seen as a rough guide to what the search engine charges for each ad served, dropped 29% from last year and 9% from last quarter. Another warning sign came from an increase in capex to above $7B, from the $5.6B that was expected. The stock see-sawed in after hours trade, first rallying before falling back and the market is now called to open lower by around 2% in the region of 1120.
Monday’s move above the 50% fib may have proved a false dawn, with shares in Google called to open back near the 1120 mark this afternoon. Today’s trade could well prove pivotal going forward as a failure to close the gap lower would offer shorts the chance to regain control of the tape. Source: xStation
