Alphabet Falls as Cash Flow Concerns Grow

Alphabet shares fell 10% after hours, erasing roughly $396 billion in market value. The decline followed quarterly results where revenue met estimates, but net income and earnings per share missed targets. The shortfall included paper losses on stock holdings, such as SpaceX. Investors reacted strongly to a negative free cash flow of $9 billion. Analysts expect the situation to worsen in the current quarter due to surging capital expenditures.

Microsoft moved in the opposite direction. The company generated nearly $19 billion in free cash flow. This performance helped lift its shares by 2.9% after hours. The market rewarded Microsoft for its ability to fund its own capital spending internally. This contrast highlighted the growing importance of cash generation for technology giants.

Asian markets reacted to the mixed earnings signals. Nasdaq futures dropped more than 1%. Samsung stock slid 5% despite record earnings across its business. The company pledged a shareholder return program of up to 110 trillion won. The slide reflected concerns that hyperscaler spending benefits equipment makers only as long as those tech giants can afford the investment.

Federal Reserve Chair Kevin Warsh held a press conference that markets interpreted as dovish. He described inflation as improving and the economy as balanced. Two-year yields fell by about 6 basis points in New York. Long-term yields also rallied during Asian trading hours. The probability of a rate hike in December remains near 78%. However, futures contracts have trimmed about 10 basis points of tightening from next year's expectations.

Warsh announced that one of the eight FOMC meetings next year will focus on strategy rather than policy. He indicated this session will occur in the fall, likely October. In 2028, two meetings will be dedicated to strategy, reducing policy-setting sessions to six. This change creates gaps of 12 to 13 weeks between decisions. The structure complicates pricing for Fed fund futures, which are tied to specific meeting dates.

The Federal Reserve can still change rates between meetings, though this is rare. Warsh’s approach aligns with his preference for leaving guidance to the markets. The European Central Bank meets today. Investors seek clues on whether it will hike rates in December. Other key data releases include US third-quarter GDP, September personal spending, and PCE inflation.