Nasdaq Futures Slump As Microsoft's Outlook Dampens Tech Recovery Hopes — Analyst Warns Of More Bumpiness By Mid-February

Zinger Key Points
  • Volatility will likely pick up in the near term as the market sways to earnings reports.
  • Until the market sees off the Feb. 1 rate decision, bad news could be good news, fund manager says.
Nasdaq Futures Slump As Microsoft's Outlook Dampens Tech Recovery Hopes — Analyst Warns Of More Bumpiness By Mid-February

U.S. stocks look set to start Wednesday’s session on the back foot as traders digest mixed earnings news flow and continued pouring in of weak economic data points.

Cues From Tuesday’s Trading:

The major averages closed Tuesday’s session on a mixed note as profit-taking following two straight sessions of strong advances triggered weakness in the market. Lackluster nationwide business activity data provided the impetus to unwind some of the bets.

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Preliminary estimates released by S&P Global on Tuesday showed that both the manufacturing and services sectors continued to remain in contraction territory.

Industrial, real estate, utility and consumer staple stocks saw moderate strength, while communication services, healthcare and IT services stocks move to the downside.

The start of trading on Tuesday was marred by a technical glitch on the NYSE that halted trading in many blue-chip stocks.

U.S. Indices' Performance On Tuesday
Index Performance (+/-)   Value
Nasdaq Composite -0.27%   11,334.27
S&P 500 Index -0.07%   4,016.95
Dow Industrials +0.31%   33,733.96

Analyst Color:

“We are in the trough of the S&P 500’s earnings slowdown,” fund manager Louis Navellier said in an exclusive comment to Benzinga. Positive guidance is now more important than actual quarterly results due to the lingering uncertainty, he added.

The market held up remarkably well amid lackluster sales and earnings from companies such as 3M Co. MMM, Johnson & Johnson JNJ and Union Pacific Corp. UNP and the technical glitch, he noted.

Navellier sees a bumpy mid-February from the earnings perspective and flagged the Federal Open Market Committee meeting’s policy statement due on Feb. 1 as the most important forthcoming event.

“The Fed is anticipated to raise the federal funds rate 0.25%, but everyone is hoping for dovish comments in the FOMC statement, like 'data dependent' or 'inflation is moderating' that might imply that the Fed will be done raising key interest rates sooner than later,” he added.

Until Feb. 1, bad economic news is good news for the market, Navellier said.

Futures Today:

U.S. Futures' Performance On Wednesday
Index Performance (+/-)  
Nasdaq 100 Futures -1.18%  
S&P 500 Futures -0.72%  
Dow Futures -0.51%  
R2K Futures -0.55%  

In premarket trading on Wednesday, the SPDR S&P 500 ETF Trust SPY slipped 0.67%, to $397.53, and the Invesco QQQ Trust QQQ slumped 1.13%, to $285.10, according to Benzinga Pro data.

Upcoming Economic Data:

The Mortgage Bankers Association is due to release the weekly mortgage application volume data at 7 a.m. EST. The metric climbed 27.9 week-over-week in the week ended Jan. 13, with both refinance and purchase activity increasing by double-digit percentages.

The Energy Information Administration is scheduled to release its petroleum inventory report for the week ended Jan. 20 at 10:30 a.m. EST.

Stocks In Focus:

  • Microsoft Corp. MSFT shares slipped over 2% following the sub-par forecast the company issued on the earnings call.
  • Intuitive Surgical Inc. ISRG tumbled about 9% after the surgical robot manufacturer reported a fourth-quarter earnings miss.

Notable Companies reporting earnings:

Before the open:

  • Boeing Company BA
  • AT&T Inc. T
  • General Dynamics Corp. GD
  • Norfolk Southern Corp. NSC
  • Abbott Labs Inc. ABT
  • Freeport McMoRan, Inc. FCX

After the close:

  • Tesla Inc. TSLA
  • International Business Machines Corp. IBM
  • CSX Corp. CSX
  • Lam Research Corp. LRCX
  • Seagate Technology Holding plc STX

Top Analysts’ Calls:

  • JPMorgan cuts Tesla price target from $125 to $120 ahead of its quarterly results.
  • Cowen raises price target for Texas Instruments Inc. TXN from $160 to $175.
  • JPMorgan cuts price target for Rivian Automotive Inc. RIVN from $32 to $28.
  • DA Davidson raises price target for Microsoft from $270 to $280, while JPMorgan and Jefferies reduced their respective price targets.

Commodities, Bonds, Other Global Equity Markets:

Crude oil futures rose 0.09% to $80.20 on Wednesday, recovering from the previous session’s 1.76% plunge.

The benchmark U.S. 10-year Treasury note held below the 3.5% level and traded down 0.031% points at 3.436%.

Asia-Pacific stocks closed Wednesday’s session on a mixed note, with Japan’s Nikkei 225 average extending its gain for the fifth straight session. The South Korean and Singaporean markets, which opened after the Lunar New Year holidays, rose notably, as they played catchup with the gains in the other regional markets.

The Chinese, Hong Kong and Taiwanese markets remained closed for trading.

India’s Sensex fell over 1.27% after short-seller Hindenburg called out Adani Group, the conglomerate run by the world’s fourth-richest man Gautam Adani, as a con business.

European stocks opened Wednesday’s session higher but have reversed course since then.

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Posted In: Dow IndustrialsFederal Open Market CommitteeInflationNASDAQ CompositeRecessionS&P 500 IndexEarningsNewsGuidanceFuturesPreviewsTop StoriesEconomicsFederal ReservePre-Market OutlookMarketsTrading Ideas