Five things you need to know before the market opens on Wednesday 25 January:
1. — Stock futures lower as earnings suppress
U.S. stock futures edged lower on Wednesday, while the dollar edged higher against global peers and Treasury yields eased as markets reacted to an underwhelming corporate earnings season.
Microsoft’s softer-than-expected profit forecast, which clouded an otherwise solid December quarter earnings report, followed muted updates across the industrials, technology and consumer sectors on Tuesday, and appeared to keep bullish sentiment in check ahead of another round of earnings reports ahead and to the clock.
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.
Before the start of the week, analysts predicted 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 ended in March.
However, that calculation may change as more and more companies cite economic uncertainty, persistent inflation and a pullback in consumer spending as headwinds to their near-term profit forecasts.
in concert, Treasury Bonds yields are trading firmly lower heading into Wednesday’s session, following the strongest 2-year bond auction in more than two years yesterday and concerns that the U.S. could move recession over the first half of this year.
Benchmark 10-year Treasury note yields were 4 basis points lower in overnight trading at 3.434% while 2-year notes fell to 4.148%. The US dollar index, which tracks the greenback against a basket of global peers, was up 0.12% at 102.039.
At the start of the trading day on Wall Street, futures linked to the S&P 500 are priced for a 29-point opening bell drop, while those linked to the Dow Jones Industrial Average are set for a 180-point drop. The technology-focused Nasdaq was marked down 120 points.
In overseas markets, Europe’s Stoxx 600 fell 0.28% amid a mixed December quarterly earnings season and economic activity data showing business sentiment in Germany, the region’s largest economy, picked up momentum over the month of January.
In Asia, the region-wide MSCI ex-Japan index hit a new seven-month high in early trade, although markets in China remain closed for the Lunar New Year celebrations. Japan’s Nikkei 225 rose 0.35%.
2. — Microsoft falls as cloud outlook offsets second-quarter earnings
Shares slipped lower after hours trade, in fact, when the group forecast current quarter revenue for its intelligent cloud division of between $21.7 billion and $22 billion, a number that missed Refinitv forecasts.
For the December quarter, Microsoft said revenue for Azure, its flagship cloud division, rose 31% from last year, beating Street forecasts but slowing from earlier gains in the mid-to-high 40 percent range as companies continue to scale back on spending on digital infrastructure and the dollar continued its climb in 2022.
Microsoft’s underside 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 down 1.67% in premarket trading to indicate an opening bell price of $238.01 each.
3. — Tesla earnings on deck with price cuts, margins in focus
Analysts will be watching for a host of issues likely to weigh on both the top and bottom lines over the three months ending in December, with price cuts in key markets expected to weigh on profit margins and waning demand likely to reduce 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 revenue of $24.03 billion. However, the 35% advance would be the slowest annual sales growth in more than two years.
Tesla delivered a record 405,278 new cars over the three months ending in DecemberUp 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 down 1.3% in premarket trading to mark an opening bell price of $141.86 each.
4. — Boeing returns to profit as orders build, China reopens
Boeing is expected to post adjusted core earnings of 26 cents a share for the three months ending in December, compared with the massive loss of $7.69 a share it reported last year — thanks in part to a charge of $3.5 billion related to delays in production and delivery of its 787 widebody — on revenue of $30.38 billion.
The planemaker’s order book is also likely to be in focus, following a large order for its 787 Dreamliner by United Airlines UAL following permission from the Federal Aviation Administration to resume deliveries following an investigation into concerns related to safety inspections.
Boeing delivered 480 planes last year, a 41% increase from 2021 levels, while taking 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 premarket 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 (FOX) – Get free report and News Corp (NWS) – Get free reportthe two media empires he controls with his son, following criticism from key shareholders.
Murdoch (91), who together with his son Lachlan has effective control of Fox, said in October that the two media groups had formed ‘special committees’ to ‘thoroughly evaluate a potential combination. However, key shareholders pushed back against the deal, which the
The Murdoch family trust said it would only support the tie-up if it was approved by a “majority vote of the shares held by unaffiliated shareholders entitled to vote.”
Murdoch said in a Securities and Exchange Commission filing late Tuesday that “he and Lachlan K. Murdoch have determined that a combination is not optimal at this time for the shareholders of FOX and News Corp..”
Fox shares were marked 2.42% higher in premarket trading to mark an opening bell price of $31.14 each, while News Corp rose 4.5% to $20.80 each.