Microsoft Disappoints On Weak Outlook
Shares of Microsoft are indicated down in premarket trading following a weak forecast after … [+] Tuesday’s close. (Photo by Jeenah Moon/Getty Images)
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Key Takeaways
Disappointing Outlook From Microsoft Tesla To Report After The Close S&P 500 Trying To Hold 4,000
Markets on Tuesday were about as exciting as watching paint dry in a bathroom. Investors stayed on the sidelines as they awaited earnings season to pick up after the close, with Microsoft MSFT being the main attraction.
Microsoft reported revenue growth of 2% while net income fell 12%. It was the slowest period of sales growth in six years for the company. One area of strength continues to be in cloud computing, specifically, the company’s Intelligent Cloud service, which includes its Azure cloud computing business. Azure grew by 31%; however, growth began slowing near the end of the year and the company warned it would likely continue to slow into 2023. Shares of Microsoft initially rallied after the close Tuesday, but the company issued a weaker than expected forecast, causing its stock price to reverse course and is currently trading down 2.5% in premarket trading.
Boeing BA is also out this morning with their earnings. While the company generated positive free cash flow for the first time since 2018, operating costs weighed on results. The company missed on both adjusted earnings per share and revenues. Boeing is often seen as a bellwether of overall economic conditions and their lackluster report may be a further sign of a weakening economy. In premarket trading, shares of Boeing are down around 3%.
Other companies reporting so far this week have included AT&T. The company reported mixed results but offered a weak outlook for 2023 and an annual profit below what the street was expecting. MMM also reported earlier this week. Their report was uninspiring with a downtrodden forecast for the year. The company also announced layoffs totaling about 2.6% of its workforce.
More earnings are set to be announced today after the close. Both IBM IBM and Tesla are on deck. Tesla’s position as a market leader will certainly be the main focus. I’ll be listening closely to hear what the company is forecasting for the year. Heading into Wednesday, shares of Tesla have rallied from a recent low of just over $100 earlier this month to close Tuesday at just under $144. The stock has an expected move for the rest of this week of just under $13.
For today, there are a few things I’ll be watching aside from the companies already discussed. First, I’ll be watching shares of Amazon AMZN . Given the weaker than expected outlook by Microsoft in the cloud computing area, shares of Amazon look to also be under pressure in premarket activity. Amazon’s cloud computing service has been a main driver for that company and it will be interesting to hear what the company has to say when they report earnings next week.
Secondly, I’m watching volatility closely. In light of earnings season and the disappointing report from Microsoft, I’m a little surprised that the VIX isn’t higher. What I’m looking for in there is to see whether the market is chalking Microsoft’s weaker than expected results to a one-off or if volatility begins increasing in anticipation of further weakness.
I’m also keeping an eye on oil. Crude prices have been sitting right around $80. Oil is a bit of a pick your poison. If prices move higher, it could be seen as inflationary. On the other hand, should prices being falling, investors may see it as a sign of a weakening economy.
Lastly, I’m closely watching to see where the market settles today. I think if the S&P 500 can close above 4,000, it could be a positive sign moving forward. Holding that level may suggest the market has priced in earnings and found its footing. Regardless of how things play out, I would stick with your investing plan and long term of objectives.
tastytrade, Inc. commentary for educational purposes only.
