The futures market is decidedly in the red, dragged lower by selling related to a few key earnings reports. Equity futures were initially buoyed higher yesterday afternoon when Dow-30 company Microsoft (MSFT) reported quarterly results that were not far off the Street’s expectations. However, that stock declined when the CFO stated that growth of its cloud services business was moderating, suggesting weaker growth rates in the coming quarters. Markets fell further when Dow-30 component Boeing (BA) reported weaker-than-expected quarterly performance and outlook. Overall, we expect a weak start to the trading day.
The stock market stumbled yesterday right out of the gate, as a systems issue at the New York Stock Exchange caused over 200 equities to trade much lower before recovering to previous prices. The unusually high number of volatility-related trading halts related to the computer issue concerned investors for a time. Over the course of the day, positive reports came out from some companies, including Travelers Companies (TRV), which recorded decent revenue performance; traders shrugged off losses related to catastrophes. Verizon (VZ) also gained on an earnings outperformance. Across the entire market, earnings were mixed and the S&P 500 fell 3 points, while the NASDAQ was off 30 points. However, the Dow Jones Industrial Average bucked this trend, climbing 104 points. Market breadth favored the decliners over the advancers by a 1.1-to-1.0 ratio. Industrial stocks were among the best performers and healthcare equities were among the weakest.
In commodity news, oil prices rose yesterday as demand increased due to reopening of the economy in China after it moved away from its zero COVID-19 policy. On the fixed income boards, U.S. Treasury Bond yields were down across maturities as traders moved into the safe-haven asset. The Chicago Board Options Exchange Volatility Index, or VIX, fell yesterday as demand for options protection waned a bit.
Several economic reports will be released in the days ahead. These include initial and continuing jobless claims, real GDP (gross domestic product), and new home sales on Thursday. Core and non-core Personal Consumption Expenditure (PCE) price indices (the Federal Reserve’s preferred measure of inflation) and the University of Michigan Consumer Sentiment Index will be released on Friday. These economic reports should give insight into how the U.S. consumer is faring.
Additionally, several hundred companies will post fourth-quarter earnings results in the days ahead. This includes several Dow-30 components, such as International Business Machines (IBM), Dow Inc. (DOW), Intel (INTC), Visa (V), American Express (AXP), and Chevron (CVX). All told, we think most eyes will be on the earnings guidance released this week – until we hear from the Federal Reserve when their next monetary policy meeting concludes on February 1st.
At the time of this article’s writing, the author held positions in one or more of the companies mentioned.
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