Dow Jones in the green as broader US markets recover at the close, but more earnings await

4:05pm: Slight recovery by the closing bell

At 4pm, US stocks had recovered from the tech-led drop on Wednesday morning. The Dow Jones eked out a winning session, up 10 points to finish flat at 33,744. Meanwhile, the S&P 500 was also on even footing at 4,016 and the Nasdaq had mostly recovered but still finished 21 points (0.2%) lower at 11,313.

Investors are awaiting key earnings from Tesla this afternoon, which should further dictate how the markets will perform during the rest of the week.

12:08pm: Broad market rally framed by Microsoft results

At midday, the Dow was down 192 points, 0.6%, to 33,542, the Nasdaq Composite slid 122 points, 1.1%, to 11,212 and the S&P 500 lost 31 points, 0.8%, to 3,986.

The indexes are on pace to fall after a three-day winning streak for the Dow. Microsoft’s earnings have cast a cloud over the session. 

“Microsoft’s earnings have provided another reason for caution, especially given that companies continues to make headlines with news of layoffs,” said Chris Beauchamp, chief market analyst at online trading platform IG. “Markets are now hoping that the Fed’s hiking cycle is just 50 or even 25bps away, but while that relieve some pressure it is unlikely to transform the outlook. Once the Fed is done raising rates the game shifts to worrying about a weakening of data – to get to the sunlight uplands of loose policy, we first have to go through the dark valley of a recession.” 

9.40am: Microsoft stock drops on weak earnings guidance

US stocks fell sharply at the open on Tuesday as Microsoft served up lackluster guidance on its earnings call, creating investor jitters for the remaining financial reporting season.    

Just after the market opened, the Dow Jones Industrial Average shed 245 points to 33,489, while the S&P 500 eased 45 points at 3,972 and the tech-heavy Nasdaq Composite lost 173 points to 11,162.

Microsoft Corp stock weighed on the major indices, as shares of the tech giant slipped nearly 4% after the company issued weak earnings guidance while results for its latest quarter showed its cloud business slowed even as its profit beat expectations.  

“With the bulk of earnings still in front of the market, the question as to whether the shift towards growth being signaled by recent rallies is warranted could be answered by upside earnings surprises and solid guidance,” LPL Financial chief global strategist Quincy Krosby said.

6.30am: Tesla and Boeing due to report

Wall Street is likely to open lower on Wednesday as traders prepare for more corporate earnings reports after tech giant Microsoft turned in a mixed performance, with second-quarter earnings beating expectations but revenue falling short.  

Futures for the Dow Jones Industrial Average (DJIA) declined 0.5% in pre-market trading, while those for the broader S&P 500 index dropped 0.7%, and contracts for the Nasdaq-100 fell 1.1%.

Shares of software giant Microsoft Corp, which reported after the closing bell on Tuesday, were down 2.2% in after-hours trading. While the final quarter of 2022 was more robust than anticipated, AJ Bell investment director Russ Mould noted there is a clear sign of deceleration in the company’s Azure cloud computing arm.

“Microsoft, like several of its rivals, had already sent a clear message about its view on the immediate outlook by announcing large job cuts – it’s not really a surprise to see earnings guidance trimmed accordingly,” Mould commented. 

“A gloomy prognosis on its immediate prospects from Microsoft won’t have helped the market’s mood and neither will Johnson & Johnson’s warnings of a continued impact from inflation,” he added.

Tesla Inc’s earnings and outlook statement, due after the close today, will provide investors with more insight into the electric vehicles maker’s decision to cut prices to boost to sales, and the implications for earnings, said Mould. Boeing is also scheduled to report 4Q earnings today, before the market opens

Economic data will also be in focus later this week. “Thursday’s fourth quarter GDP figures for the US could either reinforce or blow-up expectations for a soft landing for the American economy, with core inflation numbers on Friday helping to provide some insight into the Federal Reserve’s decision-making ahead of its crunch meeting next week,” Mould said.