Wall Street Stocks Trim Losses After Tech Stocks Rebounded, Tesla and Microsoft In Focus

Barry Adams
25 Jan, 2023
New York City

Benchmark indexes erased most of the session's losses as investors digested corporate earnings releases and tackled worries about rising rates and recession fears.  

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.

Despite the earnings worries, benchmark indexes managed to erase losses in the day and looked ahead to earnings from large companies and durable goods orders and fourth quarter GDP growth data.   

The S&P 500 index fell 0.73 points to 4,016.22 and the Nasdaq Composite index dropped 20.91 points to 11,313.36. 

After the close of regular session, Tesla reported a surge in production and delivery of electric vehicles and record quarterly revenue and profit in the fourth quarter 2022. 

 

Energy Prices Traded Sideways 

Crude oil price increased 23 cents to $80.35 a barrel and natural gas futures contract price eased 21 cents to $3.01 a thermal unit. 

 

Treasury Yields Hovered Near Recent Lows 

The yield on 2-year Treasury notes decreased to 4.13%, 10-year Treasury notes eased to 3.45% and 30-year Treasury bonds declined to 3.60%. 

 

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.

In a conference call with investors, CEO Satya Nadella said revenue in the current quarter is expected to fall between $50.5 billion and $51.5 billion, about $1.0 billion lower than what most analysts on Wall Street were looking for. 

The revenue guidance at the mid-point of the range showed an increase of 3% from the previous year.  

Azure cloud services revenue decelerated to 38% adjusted for currency swings in the fiscal second quarter from 42% in the previous quarter as clients looked for ways to optimize spending and the division's sales growth declined to 31% including the effect of a strong dollar. 

Azure sales growth dropped to "mid-30s" by the end of the quarter and is expected to fall by another "4-to-5 percentage points" in the fiscal second half which ends in June 2023. 

Tesla Inc edged up a fraction in the after-hours trading to $145.10 after the electric vehicle maker reported stellar quarterly results. 

Tesla Inc said revenue in the December quarter increased 37% to $24.3 billion and net income soared 59% to $3.7 billion and diluted earnings per share rose to $1.07 from 68 cents a year ago.

Tesla said electric vehicles production surged 44% from a year ago to 439,701 in the December quarter and deliveries rose 31% to 405,278.

 

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. 

 

UK Wholesale Inflation Fell for the 5th Month 

The measure of wholesale inflation declined for the fifth month in a row, calming fears of high inflation and supporting the case for a slower rate hike by the Bank of England. 

The UK producer price index slowed to an annual pace of 16.5% in December from 18% in November, the Office for National Statistics reported Wednesday. 

The index in October showed wholesale inflation at 20.2%. 

The producer price index, a measure of wholesale inflation, has been declining tracking lower energy prices in the last three months. 

On a monthly basis, output prices dropped 0.8%, following a 0.1% fall in the previous month and changed at the lowest monthly rate since April 2020.

 

Europe Stock Movers 

Lonza Group AG increased 7.4% to 522.0 Swiss francs after the pharmaceutical contract manufacturing company reported strong financial results and announced a share buyback plan. 

In 2022, revenue increased 15% to 6.2 billion Swiss francs and operating earnings improved 57% to 2.1 billion Swiss francs. 

The company increased dividend by 17% to 3.50 Swiss francs and proposed a stock repurchase plan of 2.0 billion Swiss francs.  

Aviva Plc increased 3.0% to 454.40 pence after the British insurer reiterated its estimate for stock repurchase and dividends. 

Polymetal International Plc declined 20% to 276.40 pence after the Russia-focused gold mining company released its fourth quarter and 2022 production data. 

Fourth quarter gold equivalent increased 16% to 540 Koz from 467 Koz in the comparable quarter in 2021. 

In 2022, gold equivalent production increased 2% to 1,712 Koz, meeting the company estimate of 1.7 million ounces. 

2022 revenue declined 3% to $2.8 billion on the back of lower average gold and silver prices. 

The company reiterated its 2023 production outlook of 1.7 million ounces and production cost between $950 and $1,000 an ounce. 

 

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.