News Microsoft disappointed by weak outlook

key points

  • Disappointing outlook for Microsoft
  • Tesla to report after market close
  • S&P 500 tries to hold above 4,000

Market Tuesday is as exciting as watching paint dry in the bathroom.Investors stay on the sidelines as earnings season picks up after market close, Microsoft
Microsoft Corporation
as the main attraction.

Microsoft reported a 2% increase in revenue, while net income fell 12%. It was the company’s slowest sales growth in six years. One area of ​​strength remains cloud computing, particularly the company’s intelligent cloud services, which include its Azure cloud computing business. Azure grew 31%; however, growth started to slow toward the end of the year, and the company warned that the slowdown could continue into 2023. Microsoft shares initially rose after the close on Tuesday, but the company issued a weaker-than-expected forecast, causing its shares to reverse course and are now down 2.5% in premarket trading.

Their income also came out this morning. While the company generated positive free cash flow for the first time since 2018, operating costs weighed on results. The company missed adjusted earnings per share and revenue. Boeing is often viewed as a bellwether for overall economic conditions, and its downbeat report could be a further sign of economic weakness. Boeing shares were down about 3% in premarket trading.

Other companies reporting earnings so far this week include AT&T. The company reported mixed results, but it was not optimistic about the outlook for 2023 and its annual profit fell short of market expectations. MMM also reported earlier this week. Their reports were underwhelming and their forecasts for the year were dismal. The company also announced layoffs totaling about 2.6% of its workforce.

More earnings will be announced after the close today. IBM
and Tesla on deck. Tesla’s status as the market leader is sure to be the main focus. I’ll be listening carefully to the company’s forecast for the year. Heading into Wednesday, Tesla shares had rebounded from recent lows of just over $100 earlier this month to close just below $144 on Tuesday. The stock expects the rest of the week to trade just below $13.

Today, in addition to the companies already discussed, I will focus on a few things.First, I’d focus on Amazon stock
Amazon’s stock also appeared to be under pressure during pre-market activity given Microsoft’s weaker-than-expected outlook in cloud computing. Amazon’s cloud computing services have been a major driver for the company, and it will be interesting to hear what the company has to say when it reports earnings next week.

Second, I pay close attention to volatility. Given earnings season and Microsoft’s disappointing report, I’m a little surprised the VIX isn’t moving higher. What I’m looking for there is whether the market attributes Microsoft’s weaker-than-expected results to a one-off result, or whether volatility starts to pick up in anticipation of further weakness.

I’m also looking at oil. Crude oil prices have been around $80. Oil is kind of like your poison. If prices move higher, it may be considered inflation. On the other hand, if the price falls, investors may take it as a sign of economic weakness.

Finally, I am closely watching the market action today. I think if the S&P 500 can close above 4,000, that could be a positive sign. Holding this level could be a sign that the market has priced in gains and found a footing. Regardless of the outcome, I would stick to your investment plan and long-term goals.

Reviews by tastytrade, Inc. are for educational purposes only.

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