Nasdaq set to lead market lower after Microsoft forecasts softer demand

Nasdaq set to lead market lower after Microsoft forecasts softer demand

U.S. stocks were on course for a soft open after a warning on demand by Microsoft hit sentiment.

How are stock-index futures trading
  • S&P 500 futures ES00 dipped 19.5 points, or 0.4% to 4013
  • Dow Jones Industrial Average futures YM00 fell 120 points, or 0.3% to 33705
  • Nasdaq 100 futures NQ00 fell 91 points, or 0.7% to 11819

On Tuesday, the Dow Jones Industrial Average DJIA rose 104 points, or 0.31%, to 33733, the S&P 500 SPX declined 3 points, or 0.07%, to 4016.95, and the Nasdaq Composite COMP dropped 30 points, or 0.27%, to 11334.

What’s driving markets

As investors wait for next week’s Federal Reserve interest rate decision — and Fed officials keep quiet until then — the monetary policy vacuum allows for a sharper focus on the fourth quarter corporate earnings season.

And, unfortunately for equity bulls, the latest important company update has not been taken well by the market.

Technology bellwether Microsoft MSFT caused a sell-off in index futures after the software group, following Tuesday’s closing bell, delivered mostly better-than-expected figures but warned of softening demand for its cloud services amid an economic slowdown.

Shares in Amazon AMZN, Microsoft’s main rival in cloud services, were also set to open lower on Wednesday.

The tech-rich Nasdaq Composite index COMP is up 8.3% for the year to date as investors made bets some of the big cash-generative names had been sold down too much in the wake of the 2022 Fed-induced bear market.

“There’s been a little bit of a bias towards risk-off sentiment over the last 24 hours, thanks partly to some weaker-than-expected earnings releases that added to growing concerns about a potential U.S. recession,” said Jim Reid, strategist at Deutsche Bank.

The Microsoft results and forecast are symptomatic of what has been a decidedly mixed bag of earnings reports for the season to date.

With about 14% of S&P 500 companies having reported, only 64% of those have beaten analysts forecasts, according to the latest summary from Refinitiv, and that’s several percentage points below the long term average.

Companies stepping up to the plate on Wednesday include: Tesla TSLA, AT&T T, IBM IBM, ServiceNow NOW, Lam Research LRCX, CSX CSX, Abbott ABT, Wynn WYNN, and Nasdaq NDAQ.

There is no economc data on the calendar for Wednesday.

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