Alphabet's robust results lifted US market sentiment, despite GDP growth in Q3 missing expectations. The strong performance at Alphabet, especially AI-driven cloud services and advertisement revenue, balances out the concerns of an economic growth rate that has been modest at 2.8%. These mixed signals are raising questions over whether the Federal Reserve will cut interest rates and if it is stable.
Key Points:
Strong quarterly performance by Alphabet buoyed market sentiment despite poor results in Q3 GDP.
US GDP growth lagged at 2.8% vs. the expected 3.0%, fueling economic concerns.
Federal Reserve may consider lower GDP when considering rate cuts next week.
High-performing tech stocks, to which Alphabet belongs, indicate sector resilience.
Alphabet Success Amid Decline in Q3 GDP
The US economy grew by just 2.8% last quarter, below its forecast for 3% growth. Viewed through the lens of the GDP report, it is a story of muted drivers of growth, with most positive contributors for the period being government spending, while Alphabet's earnings helped perk up the NASDAQ because Alphabet stock rose 7% after reporting better-than-projected Q3 earnings. Still, the tech boost seemed to offset some of the weak GDP news, demonstrating how stronger stocks can calm market vibes in times of economic indecision.
Alphabet's cloud business, where it has invested so much in AI, accelerated for the first time in more than two years. Political-ad spending related to elections provided a boost to YouTube. Alphabet's good news could lift other tech leaders, such as Meta and Microsoft, also reporting earnings this week.
Q3 GDP Data Sparks Concerns Over Federal Reserve Policy
The Q3 GDP shortfall, brought new context according to the Bureau of Economic Analysis, before the meeting by the Federal Reserve. The Fed is expected to make a modest rate cut of 25 basis points, though Q3 growth came in lower than anticipated.
Q3 also shows a positive rise in private-sector employment of 233,000, according to ADP, so mixed economic health. These mixed signals, combined with Alphabet's strength, provide a more balanced view as the Fed weighs its rate policy.
Market Response Beyond Alphabet: Key Gainers and Losers
Other companies did report significant changes. For example, Alphabet's win is not an isolated incident in the major stock area; it is not the only company that reported a significant change. To name a few, Humana shares went up by 3% as it reported solid business performance in Medicare Advantage. On the other hand, chipmaker AMD fell about 10% after disappointing Q3 guidance, and Eli Lilly slumped over 12% as higher manufacturing costs outweighed robust demand for its weight-loss drug.
Crude oil prices in commodities added 1.6 per cent after data indicated surprising oil inventory drop in the U.S. Inventories slid 0.57 m barrels as per American Petroleum Institute. The U.S.A was expected to add it larger by 2. 9m barrels.
Conclusion
Alphabet's earnings brought much-needed optimism as the Q3 GDP report highlighted economic uncertainty. The market remains cautiously hopeful with the Federal Reserve meeting next week and further tech earnings on the horizon. High-performing tech stocks such as Alphabet may act as stabilizers amid lower-than-expected GDP growth, pointing to both opportunities and challenges ahead for investors.
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