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Tech Stocks May Lead Early Rally In Reaction To Microsoft Earnings

The major U.S. index futures are currently pointing to a higher open on Wednesday, with stocks likely to see initial strength following the intense volatility seen over the two previous sessions.

Technology stocks may help lead an early rally on Wall Street, with the Nasdaq 100 futures surging by 2.5 percent. The tech-heavy Nasdaq ended Tuesday's trading at an eight-month closing low.

The upward momentum for the tech sector comes amid a significant pre-market advance by shares of software giant Microsoft (MSFT).

Microsoft is jumping by 5.2 percent in pre-market trading after reporting better than expected fiscal second quarter results and providing upbeat guidance.

Fellow Dow component Boeing (BA) is also seeing pre-market strength after the aerospace giant reported a steep fourth quarter loss due to a charge related to its sidelined 787 program but generated positive cash flow for the first time since early 2019.

Overall trading activity may be somewhat subdued, however, as traders look ahead to the Federal Reserve's monetary policy announcement this afternoon.

The Fed is widely expected to leave interest rates unchanged, but its accompanying statement could signal plans to raise rates as early as its next meeting in March.

CME Group's FedWatch Tool is currently indicating a 91.6 percent chance that the Fed will raise interest rates by a quarter point in March.

Stocks experienced another session of intense volatility on Tuesday, with the major averages showing wild swings following the substantial turnaround seen over the course of Monday's session.

The Dow fell more than 800 points in early trading before rebounding into positive territory but ended the day down 66.77 points or 0.2 percent at 34,297.73.

The S&P 500 also briefly peeked above the unchanged before once again coming under pressure going into the close, slumping 53.68 points or 1.2 percent to 4,356.54.

Meanwhile, the tech-heavy Nasdaq fluctuated but largely remained firmly negative, plunging 315.83 points or 2.3 percent to 13,539.30.

The continued volatility on Wall Street came as traders looked ahead to the Federal Reserve's highly anticipated monetary policy announcement.

The recovery attempt by the Dow was partly due to a rally by shares of American Express (AXP), with the credit card giant spiking by 8.9 percent after reporting better than expected fourth quarter results.

Dow components Johnson & Johnson (JNJ) and IBM Corp. (IBM) also posted strong gains after reporting fourth quarter earnings that exceeded analyst estimates.

On the other hand, shares of General Electric (GE) moved sharply lower after the conglomerate reported fourth quarter earnings that beat analyst estimates but weaker than expected revenues.

In U.S. economic news, the Conference Board released a report showing consumer confidence pulled back by less than expected in the month of January.

The Conference Board said its consumer confidence index dipped to 113.8 in January after climbing to a revised 115.2 in December. Economists had expected the index to drop to 111.9 from the 115.8 originally reported for the previous month.

Semiconductor stocks turned in some of the market's worst performances on the day, resulting in a 3.7 percent nosedive by the Philadelphia Semiconductor Index. The index ended the session at its worst closing level in three months.

Nvidia (NVDA) posted a steep loss after a report from Bloomberg said the graphics chipmaker is preparing to abandon its $40 billion acquisition of Arm Ltd. from SoftBank Group Corp.

Substantial weakness among software stocks also weighed on the tech-heavy Nasdaq, with the Dow Jones U.S. Software Index plunging by 3.3 percent to a seven-month closing low.

Retail, networking and transportation stocks also saw considerable weakness on the day, while housing stocks gave back ground after helping lead the rebound on Monday.

On the other hand, energy stocks skyrocketed amid a sharp increase by the price of crude oil. Crude for March delivery surged $2.29 to $85.60 a barrel amid concerns about supply disruptions.

Reflecting the strength in the energy sector, the Philadelphia Oil Service Index soared by 5.4 percent and the NYSE Arca Oil Index spiked by 4 percent.

Commodity, Currency Markets

Crude oil futures are jumping $1.17 to $86.77 a barrel after surging $2.29 to $85.60 a barrel a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,847.60, down $4.90 compared to the previous session's close of $1,852.50. On Tuesday, gold climbed $10.80.

On the currency front, the U.S. dollar is trading at 114.27 yen compared to the 113.88 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.1274 compared to yesterday's $1.1301.

Asia

Asian stocks ended mixed on Wednesday as investors braced for a hawkish Fed outcome. Concluding a two-day policy meeting later today, the Federal Reserve is expected to announce the early termination of QE asset purchases and signal its first rate hike in March to fight inflation.

Markets in Australia and India were closed for holidays. China's Shanghai Composite index fluctuated before ending 0.7 percent higher at 3,455.67, averting a technical bear market. Hong Kong's Hang Seng index finished 0.2 percent higher at 24,289.90 as technology stocks advanced.

Japanese shares closed at a 13-month low amid Covid-19 concerns and ahead of Fed decision. The Nikkei 225 Index slipped 120.01 points, or 0.4 percent, to 27,011.33, its lowest closing level since December 28, 2020 as newly confirmed Covid-19 infections in the country topped 60,000 for the first time.

The broader Topix closed 0.3 percent lower at 1,891.85, with oil and coal product, pulp and paper, as well as textile and apparel issues pacing the decliners. Odakyu Electric Railway gave up 2.8 percent and Ricoh slumped 5.3 percent.

Seoul stocks fell for a fourth day to close at an over one-year low as uncertainties surrounding an increasingly hawkish Federal Reserve and Covid-19 worries overshadowed data showing improving consumer confidence in the country.

The Kospi dropped 11.15 points, or 0.4 percent, to close at 2,709.24, marking the lowest level since the 2,700.93 close on December 8, 2020.

Samsung Electronics lost about 1 percent, Hyundai Motor declined 2.3 percent and Naver gave up 2.8 percent, while chemical firm LG Chem and financial heavyweight KB Financial Group both rose over 3 percent.

Europe

European stocks have moved sharply higher on Wednesday, extending gains from the previous session as investors hunt for battered stocks affected by the recent sell-off.

Sentiment has also been underpinned after Microsoft forecast revenue for the current quarter broadly ahead of Wall Street targets.

Traders await a Federal Reserve decision later in the day to see how hawkish the Fed sounds in the fight against high inflation.

While the U.K.'s FTSE 100 Index has jumped by 1.9 percent, the German DAX Index and the French CAC 40 Index are up by 2.4 percent and 2.7 percent, respectively.

Travel stocks topped the gainers list, with Lufthansa, Air France KLM and IAG moving sharply higher as Omicron worries ease.

Italian fashion group Tod's has also soared after retail sales returned to growth in 2021 versus the pre-pandemic period.

CMC Markets has also jumped. The global provider of online trading and institutional platform technology solutions said it sees third-quarter results consistent with its annual guidance.

On the other hand, gold and silver miner Fresnillo has shown a substantial move to the downside after a disappointing trading update.

Swiss drug contract manufacturer Lonza has also moved lower despite reporting a 20 percent increase in 2021 core earnings.

Hygiene and health company Essity has also tumbled. The company announced price increases in all product categories and markets after posting a bigger-than-expected fall in quarterly profit.

Gambling software firm Playtech has also slumped after its board reiterated its recommendation that shareholders vote in favor of the offer from Aristocrat Leisure Limited.

U.S. Economic Reports

The Commerce Department is scheduled to release its report on new home sales in the month of December at 10 am ET. New home sales are expected to jump 2.2 percent to an annual rate of 760,000.

At 10:30 am ET, the Energy Information Administration is due to release its report on oil inventories in the week ended January 21st.

Crude oil inventories are expected to edge down by 0.4 million barrels after inching up by 0.5 million barrels in the previous week.

The Federal Reserve is scheduled to announce its monetary policy decision at 2 pm ET, followed by Fed Chair Jerome Powell's post-meeting press conference at 2:30 pm ET.

Stocks In Focus

Shares of Corning (GLW) are moving significantly higher in pre-market trading after the glass and industrial products maker reported better than expected fourth quarter results.

Chipmaker Texas Instruments (TXN) may also move to the upside after reporting fourth quarter results that exceeded analyst estimates and providing upbeat guidance.

Shares of Mattel (MAT) are also seeing considerable pre-market strength after a report from the Wall Street Journal said the toymaker has won back the rights to produce toys based on Disney's (DIS) princess lineup and the blockbuster "Frozen" franchise.

On the other hand, shares of F5, Inc. (FFIV) are likely to come under pressure after the networking company beat fourth quarter expectations but offered a disappointing revenue forecast.

Consumer products company Kimberly-Clark (KMB) may also see initial weakness after reporting better than expected fourth quarter results but providing disappointing guidance.

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