Disappointing Earnings News May Weigh On Wall Street

The major U.S. index futures are currently pointing to a sharply lower open on Wednesday, with stocks likely to come under pressure following the lackluster performance seen in the previous session.

The downward momentum on Wall Street largely reflects a negative reaction to earnings news from some big-name companies.

Shares of Microsoft (MSFT) are tumbling by 3.0 percent in pre-market trading after the software giant reported its fiscal second quarter results.

Microsoft reported second quarter earnings that exceeded analyst estimates but provided disappointing revenue guidance for the current quarter.

Aerospace giant Boeing (BA) is also seeing pre-market weakness after reporting an unexpected fourth quarter loss on weaker than expected revenues.

On the other hand, shares of AT&T (T) are likely to see initial strength after the telecom giant reported better than expected fourth quarter earnings.

Overall trading activity may remain somewhat subdued, however, as traders look ahead to the release of some key economic data in the coming days.

Traders are likely to keep a close eye on reports on durable goods orders, fourth quarter GDP, and personal income and spending.

After moving sharply higher for two straight sessions, stocks turned in a relatively lackluster performance during trading on Tuesday. The major averages fluctuated over the course of the session before eventually closing mixed.

The tech-heavy Nasdaq fell 30.14 points or 0.3 percent to 11,334.27 after leading the two-day rally. The S&P 500 also edged down 2.86 points or 0.1 percent to 4,016.95, while the Dow rose 104.40 points or 0.3 percent to 33,733.96.

The choppy trading on Wall Street came as traders expressed some uncertainty about the near-term outlook for the markets following recent volatility.

Uncertainty about the outlook for interest rates and the economy may also have kept some traders on the sidelines ahead of the release of some key economic data in the coming days.

A negative reaction to some of the latest earnings news contributed to an early pullback, with 3M (MMM) posting a steep loss after reporting weaker than expected fourth quarter earnings and providing disappointing guidance.

Most of the major sectors ended the day showing only modest moves, contributing to the lackluster close by the broader markets.

Natural gas stocks showed a significant move to the downside, however, with the NYSE Arca Natural Gas Index falling by 1.3 percent.

The weakness in the sector came as the price of natural gas for March delivery plunged $0.165 or 5.1 percent to $3.057 per million BTUs.

Tobacco and networking stocks also saw notable weakness on the day, while gold stocks moved higher along with the price the precious metal.

Commodity, Currency Markets

Crude oil futures are inching up $0.12 to $80.25 a barrel after tumbling $1.49 to $80.13 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,927.20, down $8.20 compared to the previous session’s close of $1,935.40. On Tuesday, gold rose $6.80.

On the currency front, the U.S. dollar is trading at 129.93 yen compared to the 130.17 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.0869 compared to yesterday’s $1.0887.

Asia

Asian stocks rose broadly on Wednesday amid expectations the U.S. Federal Reserve will ease the pace of rate increases, citing slowing wage and inflation growth.

The upside, however, remained capped by a slew of disappointing U.S. earnings reports released after market close on Tuesday as well as data showing hotter-than-expected inflation in Australia.

Trading volumes were thin, as markets in Taiwan, China and Hong Kong remained closed for the Lunar New Year holidays.

The U.S. dollar index traded weak and U.S. crude oil prices held steady near $80 a barrel, while gold prices dipped after reaching a nine-month peak in the previous session.

Japanese stocks ended modestly higher in choppy trading as investors awaited cues from the corporate earnings season.

The Nikkei 225 Index rose 0.4 percent to 27,395.01, while the broader Topix ended 0.4 percent higher at 1,980.69.

Motor maker Nidec slumped 5.4 percent and precision tools maker Disco lost 3.5 percent on disappointing earnings updates.

Australian markets snapped a five-day winning streak and the Aussie dollar rallied to a five-month high after data showed the country’s inflation rate hit a 33-year high in the final quarter of 2022, increasing pressure on the Reserve Bank to keep raising rates for longer.

The benchmark S&P/ASX 200 Index slipped 0.3 percent to 7,468.30, while the broader All Ordinaries Index ended down 0.3 percent at 7,688.

Tech and commodity-related stocks led losses, while financials ended broadly higher on bets they will gain from higher interest rates.

Across the Tasman, New Zealand’s benchmark S&P/NZX 50 Index rose 0.5 percent to 11,994.51. The country’s consumer price index remained pinned to a 32-year high in the fourth quarter, data released earlier in the day showed, but the annual rate was lower than the Reserve Bank’s expectations.

Seoul stocks posted strong gains as trading resumed after a long holiday weekend. The Kospi jumped 1.4 percent to 2,428.57. Tech heavyweights topped the gainers list, with Samsung Electronics and SK Hynix climbing 2-4 percent.

Europe

European stocks have struggled for direction on Wednesday as investors await corporate earnings from several U.S. and European companies for directional cues.

Mass layoffs by tech companies, signs of slowing global growth and weak growth outlook from prominent companies fueled fears of a possible recession.

Currently, the U.K.’s FTSE 100 Index has edged down by 0.2 percent, while the German DAX Index and the French CAC 40 Index are both down by 0.5 percent.

Swiss drug contract manufacturer Lonza has edged down slightly despite delivering a strong 2022 performance and announcing a share buyback.

Russia-focused gold miner Polymetal International has slumped after unveiling its production results for the fourth quarter and full year.

Fresnillo has also moved to the downside despite reporting solid operating results in the fourth quarter.

On the other hand, British insurer Aviva has moved sharply higher after reiterating its guidance for dividends and capital returns.

Airline EasyJet has also soared as it forecast a return to an annual profit after three years of pandemic losses.

Alstom SA has also moved to the upside in Paris. The rolling stock maker reported that its sales for the third quarter 2022/23 rose to 4.22 billion euros from 3.92 billion euros in third quarter 2021/22.

Jungheinrich AG, a German manufacturer of advanced materials handling equipment, has also rallied after announcing that it has signed a deal to buy Indiana-based Storage Solutions group for approximately $375 million.

In economic news, official data showed U.K. producer price inflation fell to its lowest rate in almost a year last month.

The corresponding index rose 16.5 percent in the year to December 2022, down from 18 percent in the year to November and 20.2 percent in the year to October.

Separately, IFO data from Germany showed that business sentiment improved modestly to hit a seven-month high in January.

U.S. Economic Reports

The Energy Information Administration is scheduled to release its report on oil inventories in the week ended January 20th at 10:30 am ET.

Crude oil inventories are expected to inch up to by 1.0 million barrels after climbing by 8.4 million barrels in the previous week.

At 1 pm ET, the Treasury Department is due to announce the results of this month’s auction of $43 billion worth of five-year notes.

Stocks In Focus

Shares of Intuitive Surgical (ISRG) are moving sharply lower in pre-market trading after the maker of robotic surgical systems reported weaker than expected fourth quarter results.

Web application security company F5, Inc. (FFIV) may also come under pressure after reporting fiscal first quarter revenue that missed estimates and provided disappointing guidance.

Shares of Capital One (COF) may also move to the downside after the financial company reported fourth quarter results that fell short of expectations.