Shares Fall, Microsoft Signals Darker Tech Outlook: Markets Wrap

(Bloomberg) — Equity markets slipped on Wednesday after tech giant Microsoft Corp. and a slew of other major firms forecast slowing earnings, while lackluster US business activity data reminded investors of the likelihood of recession in the world’s biggest economy.

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Contracts for the Nasdaq 100 fell more than 0.5%, after a two-day rally in the underlying index ground to a halt on Tuesday when Microsoft warned of decelerating revenue growth in its cloud-computing business. Earnings reports from companies such 3M Co. and chipmaker Texas Instruments Inc. also reinforced concerns about the health of corporate America and added to investors’ jitters as they await updates from the likes of Tesla Inc. and IBM Corp.

Europe’s Stoxx 600 equity index weakened too, with shares in major software firms such as SAP SE and Sage Group Plc. feeling the heat from Microsoft and Dutch chip-tool maker ASML Holding NV posting a profit miss.

“The risks that dominated 2022 trading would seem to still pose major hurdles to a lasting equity bull market; namely, economic uncertainty, approaching recession, and a hawkish Fed actively wanting to keep financial conditions from loosening,” Bank of America strategists told clients in a note.

The Federal Reserve is widely expected to raise interest rates by 25 basis points at its upcoming meeting and expectations it will soon wind down its policy-tightening cycle have weighed on the dollar and Treasury yields. The dollar, down around 1.8% this year, was hurt on Tuesday by data showing US business activity still in contractionary territory.

However, the greenback’s gauge held around flat on Wednesday, as the yen, euro and pound retreated and the global market mood soured.

The euro slipped for the first time in six sessions, while the pound edged lower as data showed sharp declines in factory costs, fanning speculation that the Bank of England is close to completing its rate-hiking cycle. The Australian dollar on the other hand jumped to the highest since August after scorching inflation figures, that boosted rate-hike bets and sent 10-year Australian yields soaring about 10 basis points.

Elsewhere, oil prices steadied after Tuesday’s sharp decline caused by the weak US business activity, while gold inched lower after recent gains that pushed the precious metal to the highest level since April.Bitcoin fell as much as 2.5% and faced its first two-day drop this year.

Key events this week:

Earnings for the week include: Abbott Laboratories, ASML Holding, AT&T, Boeing, International Business Machines, NextEra Energy, Tesla (Wednesday); American Airlines, Blackstone, Comcast, Diageo, Intel, LVMH Moet Hennessy Louis Vuitton, Mastercard, SAP, Southwest Airlines, Visa (Thursday); American Express, Charter Communications, Chevron, HCA Healthcare (Friday)
US MBA mortgage applications, Philadelphia Fed non-manufacturing activity, Wednesday
US fourth-quarter GDP, new home sales, initial jobless claims, Thursday
US personal income/spending, PCE deflator, University of Michigan consumer sentiment, pending home sales, Friday

Some of the main moves in markets:

Stocks

S&P 500 futures fell 0.3% as of 3:37 a.m. New York time
Nasdaq 100 futures fell 0.6%
Futures on the Dow Jones Industrial Average fell 0.2%
The Stoxx Europe 600 fell 0.1%
The MSCI World index was little changed
S&P 500 futures fell 0.3%
Nasdaq 100 futures fell 0.6%
The MSCI Asia Pacific Index rose 0.3%
The MSCI Emerging Markets Index rose 0.2%

Currencies

The Bloomberg Dollar Spot Index was little changed
The euro was little changed at $1.0889
The British pound was little changed at $1.2327
The Japanese yen was little changed at 130.27 per dollar
The offshore yuan rose 0.1% to 6.7746 per dollar

Cryptocurrencies

Bitcoin fell 0.9% to $22,690.21
Ether fell 3% to $1,551.68

Bonds

The yield on 10-year Treasuries declined one basis point to 3.44%
Germany’s 10-year yield declined three basis points to 2.13%
Britain’s 10-year yield declined four basis points to 3.23%

Commodities

West Texas Intermediate crude rose 0.2% to $80.33 a barrel
Gold futures fell 0.1% to $1,949.60 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Richard Henderson.