Here on Wednesday morning the market is digesting major earnings reports from Alphabet (GOOGL) , Microsoft (MSFT) and Apple (AAPL) . All three companies easily exceeded expectations but are seeing different reactions so far.
Alphabet had the strongest report and absolutely crushed estimates. The stock gapped up on the news and is holding on to a sizable gain, although it is slightly under Tuesday night's highs.
Microsoft initially was hit with a sell-the-news reaction and was trading in negative territory for a while but has recovered and is now indicated higher in the early going.
Apple traded higher initially but sold off and is now indicated lower to start the day. All three companies are holdings of Jim Cramer's Action Alerts PLUS charitable trust.
There are many more earnings reports to come, but the question now is how these reports will impact the broader market. Many participants have been struggling with a two-tiered market that is held up by big-caps while growth and small-caps have been suffering from poor action under the surface.
On Tuesday, breadth was around three to one negative, but a late bounce helped to stem some of the damage. The selling was broad, with the indices, growth names, speculative stocks and small-caps all coming under pressure. If it wasn't for the indices, the headlines would be full of adjectives about the ugliness of the bear market action in many stocks.
Many traders are wondering if the corrective action in some groups such as cannabis and biotechnology may be close to an end. These groups have been in downtrends for months, and the pace of the decline has slowed somewhat as some weak support levels start to develop. With many of these names reporting earnings soon and the potential for some rotation out of bigger-cap names, there is a setup for some relative strength.
We had a brief taste of the shift out of big-caps and into the rest of the market early last week but it only lasted for about three days before the big-caps took control again. Now with these earnings reports out from some big names, we will see if the rotational action takes hold again.