© Reuters. A view shows a Microsoft logo at the Microsoft offices in Issy-les-Moulineaux, near Paris, France, January 25, 2023. REUTERS/Gonzalo Fuentes
A look at the day ahead in the US and world markets from Mike Dolan.
With extremely low market visibility, bouts of optimism about this year’s interest rate peaks are repeatedly interrupted by the related fear of falling demand and the prospect of an impending earnings recession.
And amid the undergrowth of fourth-quarter corporate earnings season, Microsoft’s (NASDAQ:) overnight roller coaster likely defines uncertainty.
Microsoft shares rose nearly 5% in after-hours trading on Tuesday after its bottom line beat the Street consensus. But the gains quickly disappeared after a gloomier outlook for its Azure cloud business dampened the mood, before Wednesday’s outage of its Teams and Outlook services added another technical glitch that left shares plunging. 1% before the opening on Wednesday.
The mixed earnings outlook dampened enthusiasm earlier in the week for technology stocks and chipmakers. Even forecast sales growth of 25% in 2023 was not enough to prevent shares of Dutch chip equipment giant ASML from giving back some of its gains of more than 20% so far this year and fell 2% on Wednesday. .
Antitrust concerns have also rocked big tech. Google’s parent company Alphabet (NASDAQ:) lost 2% on Tuesday after the Justice Department filed a lawsuit against Google for abusing its dominance in the digital advertising business.
Next up in Wednesday’s corporate roundup are Tesla (NASDAQ:), IBM (NYSE:), Boeing (NYSE:), AT&T (NYSE:) and NextEra Energy (NYSE:).
After a thunderous close on Tuesday, Wall St stock futures fell nearly 1% ahead of today’s open.
The broader macro picture was no less misleading than the earnings drumbeat.
While the first US business surveys of the year showed some of last year’s pessimism dissipated and beat forecasts, they also showed the seventh consecutive month of contraction in activity in January. The Richmond Federal Reserve’s manufacturing index fell back to its lowest level since June, the current cycle low.
US Treasury yields pulled back, with 10-year yields falling to 3.43% as eyes shift to next week’s Fed policy meeting and the assumption that the central bank will cut its latest rate increase to 25 basis points. With the debt ceiling stagnation also in the background, the US 3 month to 10 year yield curve inverted to another 40 year low of minus 130bp.
Traders will watch the Bank of Canada’s policy decision later on Wednesday to confirm that interest rate hikes are slowing at least. The BoC is expected to hike rates another 25bps to 4.5% this week, but then hit the pause button on what has been an aggressive tightening campaign.
The global inflation outlook also gives mixed signals.
While annual UK input and input price inflation fell much more than expected last month, consumer price inflation data from Australia surprised markets as it spiked to a high of 33 years in the December quarter. The possibility that it could force the Reserve Bank of Australia to raise interest rates again boosted the dollar.
There was further evidence of the euro zone’s business rejuvenation in the new year, as German business optimism improved amid declining energy costs and a warm winter.
In deal news, Rupert Murdoch has withdrawn a proposal to reunite News Corp (NASDAQ:) and Fox, and the company is exploring a sale of Move Inc, which operates website Realtor.com, to CoStar Group (NASDAQ:) for about $3 billion.
Key developments that may provide direction to US markets later on Wednesday:
* Policy decision of the Bank of Canada.
* US Secretary of the Treasury visits South Africa
* The US Treasury auctions a 5-year note, a 2-year floating rate note
* US Corporate Earnings: Tesla, Ameriprise, Nasdaq, US Bancorp, Abbott, NextEra, AT&T, IBM, Boeing, CSX (NASDAQ:), Seagate Technology, Crown Castle (NYSE:), Lam Research (NASDAQ:) , Freeport-McMoRan (NYSE:), Hess (NYSE:), las vegas sands (NYSE:), ADP, ServiceNow (NYSE:), Teradyne (NASDAQ:), united rentals (NYSE:), Kimberly-Clark (NYSE:), norfolk south (NYSE:), Marketaxess, Amphenol (NYSE:), Textron (NYSE:), etc.
(By Mike Dolan, Editing by Elaine Hardcastle [email protected]. Twitter: @reutersMikeD)
