The Daily Breakdown looks at the earnings results from Big Tech, as well as the US GDP report from the first quarter.
Friday’s TLDR
- Tech heavyweights Microsoft and Alphabet beat earnings.
- Q1 GDP print disappoints.
- Celsius Holdings looks for support.
What’s happening?
On Thursday, the US GDP print for Q1 came in below expectations, growing just 1.6% vs. estimates of 2.5%, according to Bloomberg economists.
Even though it might not look like it on the surface, it was a complicated report.
The US economy is still growing — which is good. However, it’s far from robust growth. Not only did it miss expectations, but it was down from the 3.4% print last quarter.
The complicated part?
It’s one thing to have moderate inflation with above-average growth. It’s another thing to have stubborn inflation and stifled growth — which has to be the Fed’s top concern at this point in the interest rate cycle.
Stagflation — which happens when there’s high inflation alongside a weakening economy and labor market — makes for a tough economic environment and is a situation we all want to avoid.
Coming into 2024, it looked like the Fed had orchestrated a soft landing, meaning inflation was coming down due to higher rates without sending unemployment higher and triggering a recession.
Now four months into the year, that’s not such a foregone conclusion.
We’ll get more of an update when the PCE report comes out this morning. Slated for release at 8:30 a.m. ET, this report is the Fed’s preferred inflation gauge. If it comes in hot, it could add to recent worries that stagflation is a potential outcome.
Imagine the negative impacts of high inflation — high gas prices, rising rents, and increasing prices at the grocery store — while the jobs market worsens and the economy declines. That’s bad news!
But the good news? We’re not there yet.
While the stagflation rhetoric has been picking up, it’s too early to say that’s our current environment. The consumer is continuing to hold up pretty well and the weakness in the GDP report wasn’t consumption, it was government spending and exports. Further, the labor report remains solid.
The GDP report will also have several revisions, but as of now, it serves as a wake-up call about potential risks that loom should the economy slow further from this point. For now, take comfort in the fact that the US economy hasn’t hit a recession.
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The setup — CELH
Celsius Holdings is a name that’s become a favorite for growth stock investors. However, that also means that the stock can be volatile.
That’s apparent when looking at the year-to-date action. Shares started the year by rallying more than 80% to its 52-week high. However, the stock is now down more than 28% from those highs.
That pullback has landed Celsius stock at an interesting point on the chart.
Shares are finding support near $68, which was the former all-time high set in 2023. If that level holds, aggressive bulls could be rewarded with a rebound. However, if it fails, technical traders will be keeping a close eye on the $60 to $63 area.
This zone was resistance in Q4 and early Q1, but then acted as support in February. Additionally, the 200-day moving average is in this zone as well, a technical indicator that measures the long-term trend.
This may be a stock to keep an eye on and potentially add to your watchlist.
What Wall Street is watching
GOOGL — Shares of Alphabet traded up to all-time highs in Thursday’s after-hours session. Revenue grew 15.4% year over year and beat analysts’ estimates, while earnings topped consensus expectations. The firm also announced a $70 billion buyback plan and initiated its first dividend of $0.20 a share.
MSFT — Microsoft stock traded higher in after-hours trading after the firm delivered a top- and bottom-line beat. Revenue grew 17.1% year over year, while Microsoft’s Azure unit generated revenue growth of 31%.
Disclaimer:
Please note that due to market volatility, some of the prices may have already been reached and scenarios played out.