Markets Today: Stock Indexes Fall as Microsoft Warns of Weaker Revenue Growth

Rich Asplund - Barchart - Wed Jan 25, 2023

Morning Markets

March S&P 500 futures (ESH23) this morning are down -0.89%, and March Nasdaq 100 E-Mini futures (NQH23) are down -1.35%.

U.S. stock index futures this morning are under pressure from a slide in technology stocks after Microsoft warned of decelerating revenue growth in its cloud-computing business. The slump in Microsoft also undercut other software and cloud-computing stocks such as Amazon.com, Adobe, and Alphabet.

Geopolitical concerns are also weighing on stocks today on fears that Germany’s decision to provide Ukraine with battle tanks might provoke an escalation in the Russia-Ukraine war.

Negative corporate news today is also weighing on stock indexes. Capital One Financial is down more than -3% in pre-market trading after reporting weaker-than-expected Q4 EPS. Also, Boeing is down more than -2% after reporting disappointing Q4 revenue, and Kimberly-Clark Q4 dropped more than -4% after reporting weaker-than-expected Q4 net sales.

Credit Suisse said it is too early to increase risks in stock portfolios and said markets are pricing in too much optimism regarding the path of inflation and central bank actions. Credit Suisse warns that corporate earnings are set to remain under pressure, with margins falling from record levels, as economic growth falters and higher interest rates raise financing costs and pricing power wanes.

European and U.S. governance bond yields are lower today due to the slump in stocks and geopolitical risks in Ukraine. The 10-year T-note yield is down -0.8 bp at 3.445%. The 10-year German bund yield is down -3.8 bp at 2.116%, and the 10-year UK gilt yield fell to a 6-week low of 3.178%.

Overseas markets are mixed. The Euro Stoxx 50 index is down -0.73%, and Japan’s Nikkei Stock index closed up +0.35%. China and Hong Kong remain closed for the Lunar New Year holidays.

European stocks today are moderately lower as losses in technology stocks lead the overall market lower. European software stocks are under pressure today after Microsoft warned of a weak outlook for its Azure cloud business. Stocks are also lower on concern that the war in Ukraine may escalate after Germany agreed to supply Ukraine with more than 100 Leopard battle tanks. In addition, hawkish ECB comments today weighed on stocks when ECB Governing Council member Makhlouf said, "inflation remains far too high, and interest rates will have to rise significantly.”

Today’s Eurozone economic news supported stocks after the German Jan Ifo business expectations index rose +3.2 to an 8-month high of 86.4, stronger than expectations of 85.3.

ECB Governing Council member Makhlouf said, "inflation remains far too high, and interest rates will have to rise significantly at a steady pace to reach levels sufficiently restrictive to ensure a timely return of inflation to the ECB's 2% medium-term target."

Japan’s Nikkei Stock Index today rallied to a 5-week high and closed moderately higher. Strength in Japanese automakers led the overall market higher as Suzuki Motor jumped more than +5% after its Indian unit reported a higher-than-expected quarterly profit as car sales rebounded and supply chain issues eased. Weakness in Japanese chip stocks limited gains in the overall market after Disco dropped more than -3% after reporting Q3 profits and a full-year forecast that was below the consensus.

Today’s Japanese economic news was bearish for stocks after the Japan Nov leading index CI was revised lower by -0.2 points to a 2-year low of 97.4 from the initially reported 97.6.

Pre-Market U.S. Stock Movers

Microsoft (MSFT) is down more than -2% in pre-market trading after reporting Q2 revenue of $52.75 billion, below the consensus of $52.93 billion, and forecasting that Q3 sales in its Azure cloud-computing business will slow by 4 or 5 points from the end of Q2. Other cloud stocks fell on the Microsoft news, with Amazon.com (AMZN), Adobe (ADBE), and Alphabet (GOOGL) down more than -1%.

Capital One Financial (COF) tumbled more than -3% in pre-market trading after reporting Q4 adjusted EPS of $2.82, well below the consensus of $3.79.

Boeing (BA) slid more than -2% in pre-market trading after reporting Q4 revenue of $19.98 billion, weaker than the consensus of $20.01 billion.

Block (SQ) dropped more than -3% in pre-market trading after Oppenheimer downgraded the stock to market perform from outperform.

Intuitive Surgical (ISRG) slumped more than -8% in pre-market trading after reporting Q4 revenue of $1.66 billion, below the consensus of $1.68 billion, and saying it won’t launch a new multiport robotic system in fiscal 2023, removing a positive catalyst for the stock.

Kimberly-Clark (KMB) dropped more than -4% in pre-market trading after reporting Q4 net sales of $4.96 billion, weaker than the consensus of $4.97 billion

F5 Inc (FFIV) tumbled more than -4% in pre-market trading after forecasting Q2 adjusted EPS of $2.36 to $2.48, weaker than the consensus of $2.50.

Texas Instruments (TXN) is up more than +1% in pre-market trading after reporting Q4 revenue of $4.67 billion, stronger than the consensus of $4.61 billion.

Phillip Morris International (PM) rose more than +1% in pre-market trading after Goldman Sachs upgraded the stock to buy from neutral with a price target of $120.

News Corp (NWSA) rose more than +2% in pre-market trading after Rupert Murdoch said he was abandoning plans to explore a recombination of Fox Corp and News Corp, two media companies he controls.

Today’s U.S. Earnings Reports (1/25/2023)

Abbott Laboratories (ABT), Ameriprise Financial Inc (AMP), Amphenol Corp (APH), AT&T Inc (T), Automatic Data Processing Inc (ADP), Boeing Co/The (BA), Crown Castle Inc (CCI), CSX Corp (CSX),

Elevance Health Inc (ELV), Freeport-McMoRan Inc (FCX), General Dynamics Corp (GD), Hess Corp (HES), International Business Machine (IBM), Kimberly-Clark Corp (KMB), Lam Research Corp (LRCX), Las Vegas Sands Corp (LVS), MarketAxess Holdings Inc (MKTX), Nasdaq Inc (NDAQ), NextEra Energy Inc (NEE), Norfolk Southern Corp (NSC), Packaging Corp of America (PKG), Progressive Corp/The (PGR), Raymond James Financial Inc (RJF), Seagate Technology Holdings PL (STX), ServiceNow Inc (NOW), Steel Dynamics Inc (STLD), TE Connectivity Ltd (TEL), Teledyne Technologies Inc (TDY), Teradyne Inc (TER), Tesla Inc (TSLA), Textron Inc (TXT), United Rentals Inc (URI), US Bancorp (USB).

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On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.