Five things you need to know before the market opens on Wednesday January 25:
1. — Stock Futures Lower As Earnings Underwhelm
U.S. equity futures moved lower Wednesday, while the dollar inched higher against its global peers and Treasury yields retreated, as markets react to an underwhelming corporate earnings season.
Microsoft’s softer-than-expected profit forecast, which clouded an otherwise solid December quarter earnings report, following muted updates across the industrial, tech and consumer sectors Tuesday, and looks set to keep bullish sentiment in check ahead of another stretch of earnings reports before and after the bell.
Boeing, AT&T, Abbott Labs (ABT) – Get Free Report and Freeport-McMoran (FCX) – Get Free Report will report earnings this morning, with Tesla and IBM (IBM) – Get Free Report expected after the closing bell.
Prior to the start of the week, analysts had forecast that collective S&P 500 earnings would fall 2.9% from last year to a share-weighted $443.4 billion, before recording a modest 0.1% expansion over the three months ending in March.
That calculus may change, however, as more and more companies cite economic uncertainty, persistent inflation and a pullback in consumer spending as headwind to their near-term profit forecasts.
In concert, Treasury bonds yields are trading firmly lower heading into the Wednesday session, following the strongest 2-year bond auction in more than two years yesterday and concerns that the U.S. may slip into recession over the first half of this year.
Benchmark 10-year Treasury note yields were marked 4 basis points lower in overnight trading 3.434% while 2-year notes fell to 4.148%. The U.S. dollar index, which tracks the greenback against a baskets of its global peers, was marked 0.12% higher at 102.039.
Heading into the start of the trading day on Wall Street, futures tied to the the S&P 500 are priced for a 29 point opening bell decline while those linked to the Dow Jones Industrial Average are set for a 180 point decline. The tech-focused Nasdaq was marked 120 points lower.
In overseas markets, Europe’s Stoxx 600 slipped 0.28% amid a mixed December quarter earnings season and economic activity data showing business sentiment in Germany, the region’s biggest economy, picked-up momentum over the month of January.
In Asia, the region-wide MSCI ex-Japan index touched a fresh seven-month high in early trading, although markets in China remain closed for the Lunar New Year celebrations. Japan’s Nikkei 225 gained 0.35%.
2. — Microsoft Slumps As Cloud Outlook Offsets Q2 Earnings Beat
Microsoft (MSFT) – Get Free Report shares slumped lower in pre-market trading after the tech giant’s near-term outlook offset a better-than-expected December quarter earnings report.
Shares slipped lower in after-hours trading, in fact, when the group forecast current quarter revenues for its intelligent cloud division of between $21.7 billion and $22 billion, a tally that missed Refinitv forecasts.
For the December quarter, Microsoft said revenues for Azure, its flagship cloud division, rose 31% from last year, topping Street forecasts but slowing from earlier gains in the mid to high 40-percent range as companies continue to pull back on digital infrastructure spending and the dollar continued its 2022 climb.
Microsoft’s bottom fell 12% to $16.4 billion while adjusted earnings fell 6.5% from last year to $2.32 per share, just ahead of the Street consensus forecast of $2.30 per share.
Microsoft shares were marked 1.67% lower in pre-market trading to indicate an opening bell price of $238.01 each.
3. — Tesla Earnings On Deck With Price Cuts, Margins In Focus
Tesla (TSLA) – Get Free Report shares slipped lower in pre-market trading ahead of the clean energy carmaker’s highly-anticipated fourth quarter earnings after the closing bell.
Analysts will be tracking a host of issues that are likely to weigh on both the top and bottom line over the three months ending in December, with price cuts in key markets expected to weigh on profit margins and fading demand likely to clip overall sales growth.
Tesla is expected to post adjusted earnings of $1.13 per share for the quarter, up 33% from the same period last year, on revenues of $24.03 billion. The 35% advance, however, would mark the slowest annual sales growth in more than two years.
Tesla delivered a record 405,278 new cars over the three months ending in December, up 31.5% from the same period last year, with 2022 deliveries pegged at 1,313,851, a 40% increase from 2021 levels but well shy of CEO Elon Musk’s promise of 50% growth rates.
Tesla shares were marked 1.3% lower in pre-market trading to indicate an opening bell price of $141.86 each.
4. — Boeing Set To Return to Profit As Orders Build, China Re-Opens
Boeing (BA) – Get Free Report shares edged higher ahead of the planemaker’s fourth quarter earnings prior to the opening bell
Boeing is expected to post adjusted core of 26 cents per share for the three months ending in December, up from the massive $7.69 per share loss it reported last year — thanks in part to a $3.5 billion charge linked to delays in production and delivery of its 787 widebody — on revenues of $30.38 billion.
The planemaker’s order book is likely to be in focus, as well, following a big order for its 787 Dreamliner by United Airlines UAL following permission from the Federal Aviation Administration to resume deliveries after a probe into concerns linked to safety inspections.
Boeing delivered 480 planes last year, a 41% increase from 2021 levels, while winning orders for at least 774 new jets, a tally that still trails market-leader Airbus. Boeing’s order backlog was pegged at 4,578 aircraft.
Boeing shares were marked 0.1% higher in pre-market trading to indicate an opening bell price of $212.19 each.
5. — Rupert Murdoch Pulls Plug on Fox-News Corp Merger
Billionaire Rupert Murdoch scrapped plans to merge Fox Corp (FOXA) – Get Free Report and News Corp (NWS) – Get Free Report, the two media empires he controls with his son, following criticism from key shareholders.
Murdoch, 91, who along with his son Lachlan has effective control over Fox, said in October that the two media groups have formed ‘special committees’ to “thoroughly evaluate a potential combination”. Key shareholders pushed back against the deal, however, compelling the
The Murdoch Family Trust to say it would only support the tie-up if it was approved by a “majority vote of the shares held by non-affiliated stockholders entitled to vote.”
Murdoch said late Tuesday in a Securities and Exchange Commission filing that “he and Lachlan K. Murdoch have determined that a combination is not optimal for the shareholders of FOX and News Corp at this time..”
Fox shares were marked 2.42% higher in pre-market trading to indicate an opening bell price of $31.14 each while News Corp gained 4.5% to $20.80 each.