Midday market 10/26: NASDAQ cools off from tech ER, Visa and small-cap carry SPY

Market Recap:

Market opened Thursday's trading session in a fairly mixed state with disappointing ER from 2 tech giants. NASDAQ dropped nearly 2% in the futures session before starting to recover right at the open today with VIX back below 30 and creating small short-covering rallies. Investor sentiment also largely continued to be supported by:

• Stability in macro policies of FED and ECB, especially European investors on BoE after speech by new UK Prime Minister Rishi Sunak this morning.

• Market optimism entering election season, including Q3 GDP report to be released tomorrow morning.

• Clarity on corporate earnings outlook.

Heat map shows clear allocation of money flows with mega tech dragging the market down in the morning:

Details on yesterday's ER:

1. Alphabet Q3 FY22

Revenue by segment (growth Y/Y):

• Advertising $54.5 billion (+3% Y/Y).

  • Google Search & other $39.5 billion (+4%).

  • YouTube ads $7.1 billion (-2%).

  • Google Network $7.9 billion (-2%).

• Google Cloud $6.9 billion (+38%).

• Google Other $6.9 billion (+2%).

• Other $0.2 billion, and hedging $0.6 billion.

Main highlights:

• Revenue +6% Y/Y $69.1 billion / +11% fx neutral (vs. $70.74 expected).

• Gross margin 55% (-3pp Y/Y).

• Operating margin 25% (-7pp Y/Y).

Cash flow:

• Operating cash flow $23.3 billion (34% margin).

• Free cash flow $16.1 billion (23% margin).

Balance sheet:

• Cash, cash equivalent, and marketable securities: $139.7 billion.

• Long-term debt: $28.4 billion.

2. Microsoft Q1 FY23: