Dow falls 300 points after corporate earnings disappoint

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U.S. stocks traded lower Wednesday, led by the Nasdaq Composite, after disappointing corporate earnings results added to fears of a possible recession.

How are stocks trading

  • The S&P 500 dropped 63 points, or 1.6% to around 3,954
  • The Dow Jones Industrial Average lost 421 points, or 1.3% to about 33,316
  • The Nasdaq Composite fell 242 points, or 2.1% to 11,094

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

What’s driving markets

As investors wait for next week’s Federal Reserve interest rate decision the monetary policy vacuum allows for a sharper focus on the fourth quarter corporate earnings season.

Unfortunately for equity bulls, the latest important company update has not been taken well by the market. Technology bellwether Microsoft caused a sell-off 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 Microsoft’s main rival in cloud services, also traded lower on Wednesday.

The tech-rich Nasdaq Composite index is up 6% 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.

Now, the Microsoft comments may cause tech bulls to call that rally into question.

“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.

Opinion: Microsoft gave Wall Street hope, but then the cloud forecast turned dark

So far, more than 90 S&P 500 companies have reported fourth-quarter earnings, and 68% of them posted stronger-than-expected results, according to FactSet.

Companies stepping up to the plate on Wednesday include: Tesla AT&T IBM ServiceNow Lam Research CSX Abbott Wynn and Nasdaq

There is no U.S. economic data on the calendar for Wednesday.

Companies in focus

  • Microsoft’s stock fell 3.4% Wednesday after reporting late Tuesday that profit declined more than 12% in the holiday season, and executives said a revenue deceleration at the end of 2022 is expected to continue into the new year as the company lays off workers. Microsoft also said early Wednesday that it’s investigating problems with its online services including its Teams messaging platform and Outlook email system after users around the world reported outages Wednesday.
  • AT&T shares rose 6.9% Wednesday as the company swung to a loss upon taking restructuring charges, but beat earnings expectations on an adjusted basis and showed continued subscriber growth in its fourth quarter.
  • Texas Instruments slipped 2.6% Wednesday after just beating profit estimates and providing an acceptable outlook amid low demand for consumer electronics.
  • Boeing Co. stock dropped 2.1% Wednesday after the aerospace giant reported an unexpected loss due partly to high expenses as it shapes plans to increase production of its 737 and 787 planes.
  • News Corp shares jumped 7% after Rupert Murdoch ditched plans to merge the two companies, a proposition that met pushback from shareholders.
  • Norfolk Southern Corp. shares tanked 5.6% after the company reported Wednesday fourth-quarter profit that came up shy of forecasts, as railway expenses rose more than revenue, which topped forecasts.
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