In the AI alphabet, cash is king
Alphabet shares fell 10% after hours, wiping out $396 billion in market value, as investors focused on a $9 billion negative cash flow amid rising capital spending. Microsoft shares gained 2.9% after hours after generating almost $19 billion in free cash flow.
1. Cash flow in focus
Alphabet shares shed 10% after hours, or about $396 billion in market value, after net income and earnings per share missed expectations. The results included paper losses on stock holdings, while investors were also concerned about negative cash flow of $9 billion as capital spending surged. Analysts suspect cash flow could be even worse this quarter.
2. Microsoft gains
Microsoft shares rose 2.9% after hours after the company generated almost $19 billion in free cash flow, as investors rewarded companies able to fund their own capital spending. Alphabet's results weighed on Asian trading, with Nasdaq futures down more than 1% ahead of reports from Amazon and Intel.
3. Rates and policy
Markets interpreted Fed Chair Warsh's press conference as dovish, sending two-year Treasury yields down about 6 basis points late in New York trading. Fed fund futures priced in about 10 basis points less tightening next year, while the probability of a December rate hike remained around 78%. Investors were also watching the ECB meeting and US economic data.
