CNBC Daily Open: Strong earnings pave the way for markets

This report is from today's CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

What you need to know today

Dow snaps four-day losing streak
The Dow Jones Industrial Average gained over 200 points on Tuesday, ending a four-day streak of declines as investors shifted focus to strong earnings reports from companies including Coca-Cola and Verizon. After the close, results from tech giants Microsoft and Alphabet rolled in. Hong Kong led a rebound in Asia markets, while investors also assess Australia's third-quarter inflation figures.

Microsoft profit pops
Microsoft issued quarterly revenue guidance above Wall Street estimates. The company also reported a surge in profit thanks to a slower pace of operating expense growth. Net income, at $22.29 billion, increased 27% from $17.56 billion, or $2.35 per share in the same quarter a year ago. The software maker's shares jumped as much as 6% in extended trading on Tuesday.

Alphabet cloud business in spotlight
Alphabet reported 11% revenue growth in the third quarter, as a rebound in advertising pushed expansion into double digits for the first time in over a year. Its shares dropped almost 7% in extended trading as the cloud business missed analysts' estimates. For the quarter, it reported earnings per share of $1.55 vs. $1.45 expected by LSEG, formerly known as Refinitiv. Google Cloud revenue was $8.41 billion vs. $8.64 billion, according to StreetAccount.

Snap shares seesaw  
Snap shares initially soared as much as 20% in after-hours trading as the company beat on the top and bottom lines. It later settled to gain a little over 1% as investors digested news that some advertisers had paused spending following the onset of the war in the Middle East.

[PRO] Rising yields and war
Yields are still rising, a war is raging, and it's uncertain whether interest rates will stay higher for longer. Last week, the yield on the 10-year U.S. Treasury note was above 4.9% for the first time since 2007. Investors continued to consider geopolitical risks from the Israel-Hamas war and the United States' restrictions on artificial intelligence chip exports to China. Here’s how to trade the volatility, according to fund managers.

The bottom line

Markets are now slowly starting to come away from the tumultuous swings of last week when Treasury yields were high, and catalysts were few. That no longer seems an issue as investors can now look to a heavy flow of earnings to make their next call.

The Dow snapped four straight sessions of losses to end higher on Tuesday. U.S. Treasury yields were steady after slipping back below 5%, though they remained near 16-year highs.

Investors also had a spate of quarterly reports to parse. Coca-Cola posted earnings and revenue above estimates. Verizon recorded its best daily performance in almost 15 years after beating analysts' expectations for both earnings and revenue. Audio streaming giant Spotify posted third-quarter results that topped expectations.

But the elephant in the room was Big Tech earnings.

Cloud revenue was key for both Microsoft and Alphabet. It's a business that's becoming even more significant with the emergence of generative artificial intelligence, which runs hefty workloads in the cloud.

The clear winner of this quarter's cloud battle was Microsoft, powered by Azure as clients flocked to new generative AI tools in the cloud that have been enhanced with software from Microsoft-backed startup OpenAI. 

Alphabet's cloud unit tried to catch up with Azure and Amazon Web Services. But Google's core advertising also weakened due to economic softening last year and increased competition from TikTok.

"If you want this stock to keep going higher, you've got to have cloud become more profitable," said Lee Munson, chief investment officer of Portfolio Wealth Advisors. "It's a third-rate cloud platform. We need to see it make money."

Keeping to the AI theme, Qualcomm announced two new chips on Tuesday designed to run AI software — including the large language models, or LLMs, that have captivated the technology industry — without having to connect to the internet.

This could potentially boost the speed with which a high-end smartphone chip processes AI models.