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Today in the Market (10/26/2022)

Good Evening. Weak earnings from Alphabet (GOOGL) and Microsoft (MSFT) on Wednesday sparked concerns that a slowdown in production could reduce corporate profits in the coming months.

Both the Nasdaq Composite and the S&P 500 fell by 2.04% and 0.74%, respectively, breaking three-day winning streaks. The Dow Jones rose by 0.01% after fluctuating throughout the trading session.

DIGITAL ADS SLOWDOWN

Meta (META), the parent company of Facebook, published its Q3 earnings, matching sales estimates and delivering less optimistic guidance for Q4 than anticipated.

As gathered by Bloomberg, here are the most significant metrics from the report compared to what Wall Street expected from Facebook’s parent company:

  • Revenue: $27.7 Billion vs. $27.4 Billion expected
  • Earnings Per Share: $1.64 vs. $1.89 expected
  • Facebook Daily Active Users: 1.98 Billion vs. 1.86 Billion expected
  • Reality Labs operating loss: $3.67 Billion vs. $3.09 Billion expected

A digital advertising slowdown is particularly damaging to social network companies like Meta. In response to rising inflation and interest rates, businesses are cutting down on advertising expenditures.

How bad is the slowdown hurting companies in the industry? Alphabet (GOOG), the parent company of Google, disclosed a significant revenue shortfall for YouTube. Snap (SNAP) also released a lackluster earnings report for the third quarter, indicating that revenue growth continues to drop and that average revenue per user fell for the period. Which has resulted in a decline of up to 60% in the value of the tech giant’s stock so far this year.

TOO MUCH SUPPLY

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Dozens of ships are waiting to unload liquefied natural gas at European storage facilities, but there is nowhere to store it: the caverns are full. As a result of the abundant supply, natural gas prices in Europe have decreased by more than 70% from their record high in August.

European authorities, who feared that their decision to cut gas imports from Russia would lead to an energy catastrophe when the weather turned cold, are relieved by this development.

Then why did it not happen?

  • First, the weather hasn’t become cold enough. This fall, a number of European countries have received warm weather, reducing the demand for heating.
  • In addition, Europe’s efforts to preserve energy are bearing fruit. According to Bruegel.org, a think group, reports that year-to-date natural gas demand is 7% below the 2019–21 average.

However… This gas glut could be brief, especially if the weather does not cooperate, say experts.

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