Wall Street Breakfast: Earnings Parade

Jan. 24, 2023 7:10 AM ET23 Comments
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Earnings parade

Earnings season will kick into overdrive today as tech giants begin to report their quarterly results. Microsoft (MSFT) is scheduled to start the festivities after the bell, with a set of results that come during a period of notable changes at the company. For one, Microsoft just revealed plans to lay off 10,000 employees (along with a related charge of $1.2B), and yesterday, the company - which revolutionized the computing industry - confirmed it would make a "multi-billion dollar" investment in ChatGPT developer OpenAI.

Snapshot: Analysts are likely to raise questions over how both events might impact Microsoft's business throughout 2023, so stick around for the conference call or catch the transcript later on Seeking Alpha. SA Marketplace author Dilantha De Silva recently discussed the long-term implications of the OpenAI investment and whether Microsoft can gain an edge over Google (GOOG, GOOGL). Also pay attention to Microsoft's segment financials and recurring revenue growth momentum, according to contributor Business Quant, while Tradevestor says it is high time for a stock split. Do you agree?

Things are likely to get volatile as earnings pour in, but so far, tech stocks have had a great start to the new year. The Nasdaq Composite Index (COMP.IND) is up nearly 10% in 2023 after getting pummeled last year as the Fed floored the accelerator on interest rates. There are still several catalysts that could derail things, so keep an eye on what corporations say about rising costs and a strong dollar, as well as slowing economic growth and other macro headwinds.

WSB poll results: Out of the 1,150 subscribers who participated in yesterday's survey - entitled "The $1T Question" - 73% said a one-trillion dollar coin solution should not be used to solve the current debt ceiling crisis. Out of the remaining participants, 16% weren't sure and only 11% felt it would be appropriate. Watch your portfolios as this story continues.

NATO bid

Turkey has issued fresh threats to block Sweden's bid to join NATO after a far-right politician publicly burned a copy of the Quran in Stockholm over the weekend. A military buildup could be another boon for defense stocks, though the latest rhetoric - combined with the possibility for cuts to U.S. defense spending - isn't spelling good news for the sector that outperformed in 2022. There is additional speculation that the U.S. could force Turkey's hand via an F-16 jet purchase from Lockheed Martin (NYSE:LMT), which is set to report Q4 earnings this morning (see the full preview here). (7 comments)

Annual jab

It's been a long time coming, but the FDA just proposed one annual dose of the latest updated COVID-19 shot for healthy adults as it aims to improve coverage rates and simplify the country's vaccine strategy. The plan would make things similar to annual flu immunization campaigns and comes ahead of a committee meeting later this week. In September, the U.S. rolled out mRNA-based COVID shots developed by Pfizer (PFE)/BioNTech (BNTX) and Moderna (MRNA) as boosters targeting Omicron BA.4 and BA.5 subvariants, but recent studies have indicated that updated bivalent shots have performed poorly against newly dominant COVID variants such as BQ.1.1 and XBB. In other news, Amazon (AMZN) unveiled its latest effort to jump into the healthcare sector with a new generic prescription service. (62 comments)

Equity strategy

Wall Street is rallying year to date, but trailing the performance of other global equity markets. At the same time, U.S. stocks with foreign revenue exposure are outperforming as global growth improves and the dollar (DXY) weakens. Research shops are jumping on the trend to identify names poised to benefit. Goldman Sachs identified 50 stocks with the highest sales exposure to China. Jefferies also released its inaugural list of global stock picks. And for those looking at charts, MKM’s technical strategist named his favorite ADRs as the S&P ADR Index (SPADR) outpaces the S&P 500 (SP500) (SPY). (16 comments)

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Today's Markets

In Asia, Japan +1.5%. Hong Kong +1.8%. China +0.8%. India +0.1%.
In Europe, at midday, London -0.4%. Paris -0.1%. Frankfurt -0.4%.
Futures at 6:30, Dow -0.3%. S&P -0.3%. Nasdaq -0.4%. Crude flat at $81.61. Gold +0.4% to $1936.50. Bitcoin +0.1% to $22,900.
Ten-year Treasury Yield -2 bps to 3.50%

Today's Economic Calendar

9:45 PMI Composite Flash
10:00 Richmond Fed Mfg.
1:00 PM Results of $42B, 2-Year Note Auction
1:00 PM Money Supply

Companies reporting earnings today »

What else is happening...

DOJ poised to file second antitrust lawsuit against Google (GOOGL).

CEO Sundar Pichai says staff cuts will avoid bigger future problems.

Spotify (SPOT) also confirms it will axe 6% of its workforce.

Wayfair (W) surges over 25% as Wall Street bears become bulls.

Commodities looking at 'superior total returns' this year - Goldman Sachs.

Hershey's (HSY) urged to reduce harmful metal levels in chocolate.

Earnings preview: General Electric (GE) set to report Q4 results.

Tesla's (TSLA) Musk testifies 'funding secured' tweet was real deal.

Amazon (AMZN) brings 'Amazon Air' cargo service to India.

This Bitcoin mining ETF is +100% YTD and January hasn't even ended yet.

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