U.S. stock futures fell in early trading on Wednesday after earnings guidance from Microsoft ( MSFT ) dampened the outlook for tech stocks and weighed on the broader market.
Futures for the S&P 500 (^GSPC) fell 0.7%, while those linked to the Dow Jones Industrial Average (^DJI) fell 160 points, or about 0.5%. Contracts on the tech-heavy Nasdaq Composite ( ^IXIC ) fell 1.2%.
Investors continued to weigh in on a lackluster earnings season, with reports from names like Tesla ( TSLA ) , IBM ( IBM ) and AT&T ( T ) lined up for Wednesday.
Microsoft shares fell 2.6 percent in premarket after the company issued a weak earnings outlook and results for the latest quarter showed its cloud business slowed, offsetting optimism about earnings that came in better than expected. Its results come after the megacap giant last week laid off around 10,000 workers while talking about a push into artificial intelligence.
Separately, Microsoft was experiencing a global network outage Wednesday morning across its Azure cloud platform as well as offerings such as Teams and Outlook.
Elsewhere in stock moves Wednesday, shares of Texas Instruments ( TXN ) fell 1.4% in early trading after the chipmaker posted its worst sales decline since 2020, while revenue fell to 4.17 billion dollars from $4.53 billion. Other semiconductors also fell after the results.
“As we expected, our results reflect weaker demand in all end markets with the exception of automotive,” CEO Rich Templeton said in the company’s earnings statement.
Shares of Fox ( FOX ) and Newscorp ( NWSA ) rose 3.9% and 1.8%, respectively, in premarket trading after the media mogul scrapped plans for a proposed Fox-News Corp merger Rupert Murdoch news. The companies split a decade ago.
Despite a mixed close on Tuesday and some underwhelming sessions this year, stocks rallied in the first few weeks of January. Gains have been particularly concentrated in tech stocks, with the Nasdaq Composite up about 8% year to date.
“So far, price action in January 2023 bears an eerie resemblance to that of July 2022, when risk assets rose and interest rates fell as investors ignored the idea of a ‘soft landing’ – the idea that the slowdown of growth would slow inflation and prevent the need for further Fed hikes,” Gargi Chaudhuri, head of iShares, Americas investment strategy at BlackRock, said in a note. “That argument faded and price action reversed as the Fed held steady and continued to raise policy rates by 75 basis points in September.”
“By now, many investors seem once again convinced that inflation is over and that slower growth will not only eliminate the need for further hikes, but even allow the Fed to cut interest rates before the end of the year.” , he added. .
Despite signals from Federal Reserve policymakers that interest rates will rise above 5%, markets are pricing in lower terminals as they expect a cut to 25 basis points at the next Jan. 31-Feb. 1.
The CME FedWatch Tool, a tool that measures investor expectations for U.S. interest rates and monetary policy, shows markets are pricing in a 98.1 percent chance of a 0.25 percent hike next week — slightly lower than 99.8 % earlier this week.
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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