U.S. stocks rebounded from sharp losses to close lower Wednesday after disappointing earnings forecasts from Microsoft ( MSFT ) and other companies weighed on the market for much of the session.
The S&P 500 (^GSPC) was slightly lower than flat, while the Dow Jones Industrial Average (^DJI) turned positive, ending the day slightly higher. The tech-heavy Nasdaq Composite ( ^IXIC ) was down 0.2%.
Investors continued to barrel through a soft earnings season, as names such as Tesla ( TSLA ) , IBM ( IBM ) and AT&T ( T ) were all in line for Wednesday.
Microsoft shares were down just 0.6% after falling nearly 4% on the day after the company issued weak earnings guidance. Results for the latest quarter showed its cloud business slowed, offsetting optimism around earnings that came in better than expected. Its findings come after the mega-communications giant last week laid off approximately 10,000 workers, citing the use of AI.
Separately, Microsoft experienced a global network outage for its cloud platform Azure on Wednesday morning, as well as offerings including Teams and Outlook.
Elsewhere in the stock movement, shares of Texas Instruments ( TXN ) fell 1.1% after the chipmaker posted its worst sales decline since 2020, while revenue fell to $4.17 billion from $4.53 billion. dollar Other semiconductors also fell after the results.
“As we expected, our results reflect weaker demand in all end markets except automotive,” CEO Rich Templeton said in the company’s earnings announcement.
Shares of Fox ( FOX ) and News Corp. ( NWSA ) rose 2.3% and 5.7%, respectively, after media mogul Rupert Murdoch abandoned plans for a proposed Fox-News Corp merger : The companies were separated a decade ago.
Despite Wednesday’s decline and several other bearish sessions this year, stocks have been on an upward trajectory for the first few weeks of January. Gains have been particularly concentrated in technology stocks, with the Nasdaq Composite up around 8% year to date.
“So far, the price action in January 2023 bears an eerie resemblance to July 2022, when risk assets rose and interest rates fell as investors began to embrace the idea of a ‘soft landing’; For further Fed growth,” Gargi Chaudhuri, Head of iShares Investment Strategy at BlackRock, notes. “That argument faded and price action reversed as the Fed held firm and continued to raise policy rates by 75 basis points in September.”
“So far, many investors once again seem convinced that inflation is under control and that slower growth will not only preclude the need for further hikes, but also allow the Fed to cut interest rates before the end of the year,” he added. .
Despite reports from Federal Reserve policymakers that interest rates will rise above 5%, markets are pricing in a lower terminal rate as they expect a cut to 25 basis points at the next meeting on January 31-February. 1.
The CME FedWatch Tool, a tool that measures investor expectations about interest rates and U.S. monetary policy, shows markets are pricing in a 0.25% hike next week at 98.1%, down slightly from this week. from 99.8% at the beginning of the week.
Alexandra Semenova is a Yahoo Finance reporter. Follow him on Twitter @alexandraandnyc
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