Investing

Before the Bell: NYSE Fumbles, Microsoft Stumbles, Will Tesla Bumble?

Paul Ausick

Published: January 25, 2023 7:35 am

Premarket action on Wednesday had the three major U.S. indexes trading lower. The Dow Jones industrials traded down 0.59%, the S&P 500 was down 0.84% and the Nasdaq was 1.44% lower.

Six of 11 market sectors closed higher Tuesday, with industrials (0.65%) and utilities (0.49%) posting the largest gains. Communications services (−0.69%) and health care (−0.65%) had the day’s largest losses. The Dow closed up 0.31%, the S&P 500 down 0.07% and the Nasdaq down 0.27%.

Tuesday’s trading volume was below the five-day average. New York Stock Exchange losers led winners by 1,595 to 1,478, while Nasdaq decliners led advancers by a margin of 5 to 4. Tuesday morning got off to a rocky start thanks to an “exchange-related issue” with some NYSE-listed stocks. Some trades were declared erroneous, and others were expected to be tossed out. After that, trading was mostly mixed.

Among S&P 500 stocks, semi truck maker PACCAR Inc. (NASDAQ: PCAR) added 8.64% on a solid earnings beat, while 3M Co. (NYSE: MMM) dropped 6.28% after missing estimates and issuing downside guidance.

The American Petroleum Institute reported that U.S. crude oil inventories were basically unchanged for the second week in a row. The U.S. Energy Information Administration reports the official inventory numbers after markets open Wednesday. Last week, the crude inventory rose by 8.,41 million barrels. On Thursday, the U.S. Bureau of Economic Analysis will release its advance report on fourth-quarter gross domestic product. Third-quarter GDP growth came in at 3.2%, while the consensus estimate for the fourth quarter is 2.6% growth.

After markets close, Tesla Inc. (NASDAQ: TSLA) will report fourth-quarter results, as will International Business Machines Corp. (NYSE: IBM) and dozens of others. But most eyes will be on Tesla. The company is expected to post quarterly revenue nearly 30% higher than in the year-ago quarter and adjusted EPS some 33% higher. The company announced Tuesday that it will spend $3.6 billion expanding its Reno, Nevada, Gigafactory, increasing its battery production and adding manufacturing facilities for its all-electric semi. Unless the report absolutely blisters expectations, Tesla is likely to take some lumps later in the day. The stock was trading down about 1.4% in Wednesday’s premarket.

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After markets closed Tuesday, Microsoft Corp. (NASDAQ: MSFT) beat its consensus earnings per share (EPS) estimate by a penny but missed on revenue. The worse news came during the conference call when the company said it expects its Azure cloud growth to slow. But the cloud business was probably the lone bright spot in Microsoft’s fiscal second quarter, and dropping four or five percentage points in the current quarter, as the company forecast, is not what investors wanted to hear. An initial positive reaction to the earnings report turned sour quickly.

To add insult to injury, the company’s Azure cloud’s Outlook and Teams services were slammed by a network outage early Wednesday morning. The outage affected the Americas, Europe, Asia-Pacific, the Middle East and Africa. Only China was spared. Microsoft said it is rolling back a network change that it believes is the culprit. Shares traded down about 2.6% in Wednesday’s premarket.

Intuitive Surgical Inc. (NASDAQ: ISRG) traded down 10% after hours Tuesday, following an earnings report that missed on EPS and revenue. The company blamed the downturn in elective surgical procedures caused by the pandemic that still lingers. Before the report, Intuitive’s stock was down 4% year over year. Shares traded down about 9% Wednesday morning.