Tech and Broad Indexes Falter After Muted Guidance from Microsoft

Barry Adams
25 Jan, 2023
New York City

Stocks accelerated declines in the week on the rising worries about the corporate earnings outlook. 

Tech stocks turned lower after Microsoft reported weakest quarterly revenue growth in several years and earnings declined more-than-expected. 

Microsoft weakness spread to the semiconductor sector and dragged stocks in several sectors after investors downgraded corporate earnings outlook for the year. 

Moreover, higher rates will only negatively impact earnings in the year as consumers struggle to adjust to price inflation and businesses struggle to contain input costs.  

The S&P 500 index fell 1.6% to 3,953.22 and the Nasdaq Composite index dropped 2.2% to 11,087.50. 

 

Energy Prices Traded Sideways 

Crude oil price was nearly unchanged at $80.12 a barrel and natural gas futures contract price eased 10 cents to $3.15 a thermal unit. 

 

Treasury Yields Hovered Near Recent Lows 

The yield on 2-year Treasury notes decreased to 4.14%, 10-year Treasury notes eased to 3.45% and 30-year Treasury bonds declined to 3.62%. 

 

U.S. Stock Movers  

Boeing Company decreased 1.1% to $209.56 after the company said rising operating costs impacted quarterly results. 

Boeing Company said revenue in the December quarter soared 35% to $20 billion and net loss shrank to $663 million from $4.2 billion. 

Diluted loss per share fell to $1.06 from $7.02 a year ago.

Microsoft Corp decreased 1.5% to $238.45 after the software developer reported weak quarterly revenue growth and earnings fell. 

Microsoft said revenue in the December quarter increased 2% to $52.7 billion and net income declined 12% to $16.4 billion and diluted earnings share fell to $2.20 from $2.48 in previous year.

 

European Indexes In Negative Territory 

European indexes declined on rate hike worries led by losses in tech stocks after Microsoft reported weaker-than-expected revenue growth and earnings. 

Recession worries dominated market sentiment after recent layoffs from large tech companies, slower global economic growth outlook and weak outlook for corporate earnings growth kept investors on the sidelines.  

The DAX index fell 0.3% to 15,044.0, the CAC-40 index declined 0.4% to 7,020.27 and the FTSE 100 index dropped 0.5% to 7,719.55. 

 

Euro Extend Recent Gains 

The euro extended recent gains to a fresh 9-month high after investors anticipated aggressive rate hikes from the ECB to continue and the U.S. Federal Reserve to slow rate hikes.  

The euro edged higher to $1.089, the British pound rebounded $1.235 and the Swiss franc edged higher to 91.99 U.S. cents.   

 

Natural Gas Prices Sink Near 16-month Low 

Natural gas prices eased for the third day in a row and inched closer to the price last seen in September 2021 amid warmer weather conditions, near-full storage and rising supply. 

Brent crude oil increased 45 cents to $86.55 a barrel, the Dutch TTF natural gas futures contract price inched lower 5% to €55.10 per MWh. 

 

Tokyo Stocks Advanced On Rate Optimism 

Stocks in Tokyo traded higher on rate optimism and investors reacted to corporate earnings. 

The Nikkei 225 average increased 0.3% to 27,395.01 and the yen edged higher to 129.77 against the U.S. dollar.

Nidec Corporation declined 5.4% to ¥7,145.0 after the maker of spindle motors used in electronic devices reported weaker-than-expected earnings. 

Disco Corp declined 3.5% to ¥39,000.0 after the maker of precision tools reported weaker-than-anticipated quarterly results. 

Net sales in the nine-month period ending in December rose 13.8% to 205 billion yen and net income increased 25.7% to 57.2 million yen. 

Earnings per share increased to 1,585 yen from 1,261 yen in the previous year. 

 

Weakness In Adani Group Drags Lower India Indexes 

Stocks in Mumbai traded lower ahead of the Republic Day holiday and Adani Group stocks declined after the U.S.-based research company published negative comments ahead of the $2.5 billion secondary offering. 

Hindenburg Research alleged that Adani Group operates multiple entities in tax havens and siphons revenue from the publicly listed entities. 

The research note also alleges that the company is involved in "brazen stock manipulation and accounting fraud scheme," without citing any specific transaction. 

Hindenburg holds short positions in the group's stocks and debts and the short seller is looking for a decline in valuation as much as 85%. 

"The report is a malicious combination of selective misinformation and stale, baseless and discredited allegations that have been tested and rejected by India's highest courts," Adani Group refuted in a statement Wednesday. 

The Sensex declined 1.3% or 773.69 points to 60,205.06 points and the Nifty index dropped 1.3% or 226.35 points to 17,891.95. 

The Indian rupee inched lower to 81.49 against the U.S. dollar.