Nasdaq 100 clings to support

After tracking sideways for the whole of this month, we could say the tech-heavy index was always going to see some volatility around earnings season when the big hitters started announcing their results. But as an entrée, the small matter of the March banking crisis reared its head again in the shape of First Republic bank who revealed that depositors fled in huge numbers ($100 billion to be more precise) during the banking stress. Uncertainty over the group’s plans to divest some of its assets have added to volatility and saw the Nasdaq breakdown with its biggest daily drop in over two months on Tuesday.

There is no doubt that this story around fleeing depositors will rumble on, with regulators getting involved and credit conditions tightening for all. In the meantime, “zombie bank status” may be conferred on First Republic which underscores the profitability crisis among US regional banks. That said, the wider sector index remains relatively steady, and volatility measures have fallen back below long-term averages again. For now, the fallout looks to be contained as tech earnings act as a boon to index buyers.

Microsoft shines on AI prospects

The first couple of tech titans certainly assuaged Tuesday’s risk-off session as both Alphabet and Microsoft offset jitters in the banking world. The results of the latter especially delighted investors with the stock finishing up over 7% higher following its first quarter results. Microsoft reported an earnings beat on revenue and EPS despite cloud struggles. The company also revealed some early AI impact which no doubt encouraged buyers, with CEO Nadella stating, “we feel we have a good lead, and we have a differentiated offering up and down the stack”.

After dipping out of its recent range the day before, the stock gapped higher at yesterday’s open above that April sideways track. Prices have hit levels not seen since April last year with next resistance around $315.

Meta shines, Amazon due

Overnight, Meta’s results showed it is much fitter and leaner after focusing on cutting costs instead of the Metaverse. The social media giant brought in 5% more monthly active users and core advertising was stronger despite the economic slowdown. The stock is up over 10% after hours. Amazon reports after the close tonight with a focus on the medium-term growth drivers of advertising growth and Amazon Web Services. These divisions traditionally earn materially higher margins than other parts of the business. E-commerce will also be in the spotlight as a gauge to see how consumer demand is faring. The 200-day SMA which capped upside in February after Q4 earnings and August 2022 sits at $106.85.

The wider Nasdaq 100 needs to close decisively above the early February top at 12,880 to conquer talk of a possible “double top” reversal formation. A breakdown could see 300 points of downside while strong resistance sits around the two tops in March and April at 13,000.