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Wall Street off lows despite Microsoft’s growth warning, Tesla beats earnings expectations


US stocks bounced off session lows as tech shares showed resilient moves after the Microsoft-induced selloff. Despite a beat on earnings expectations, the software giant warned of a further slowdown in its cloud business’ growth, causing an initial selloff in most of the tech stocks. Tesla’s shares were flat in after-hours trading, though the EV maker topped Wall Street’s estimates in both EPS and revenue as the results did not provide much of an upside surprise.

The US earnings season is not rosy so far, with an expectation of a 3.2% decline in earnings year on year in the S&P 500 in the fourth quarter, according to FactSet, which will be the first time the index has reported an annual loss since Q3 2020. However, the resilient moves on Wall Street on Wednesday suggest that investors intend to be bullish amid macro-optimism on the back of cooling inflation and a slowdown in rate hikes by central banks. The Bank of Canada raised the interest rate by 25 bps on Wednesday and indicated a rate hike pause.

In Asia, the Australian Q4 CPI data unexpectedly printed at a fresh 30-year high of 7.8% year on year, pushing up the Aussie dollar and sending the ASX 200 lower. But futures point to a higher open across the APAC region, with ASX futures up 0.23%, and Nikkei 225 futures rising 0.26%.

Click to enlarge the table
  • Dow was up 0.03%, the S&P 500 slid 0.02%, and Nasdaq fell 0.2%. 6 out of the 11 sectors in the S&P 500 finished higher, with Financial leading gains, up 0.7%. The growth sectors, including Technology, and Communication Services were down as the rally on tech came to a pause.
  • Tesla’s shares were flat in after-hours trading despite a beat on earnings expectations in the fourth quarter report. The earnings per share is $1.19 vs. $1.13 estimated and revenue is $24.32 billion vs. $24.16 billion. The profit margin, however, dropped 25.9%, the lowest in five years.
  • Bank of Canada raised the interest rate by 25 basis points to 4.5%, bringing the rate to the highest since 2007. The move was highly expected, but the central bank indicated keeping the rate on hold for the time being while assessing the policy impact on inflation. It is the first major central bank that confirmed a rate hike pause. USD/CAD had little changes, but the pair appears to face an upside pressure on the banks’ comments.
  • AUD/NZD spiked 1.2% due to divergence expectations in the monetary policy based on the CPI print. While Australian CPI shocked markets with a fresh 30-year high of 7.8% year on year in Q4, New Zealand’s inflation was flat at 7.2% from the last quarter. The results strengthened an expectation for the RBA to keep the interest rate higher for longer, but the expectation for the RBNZ to stay pace in rate hikes has been weakened.
  • Gold futures climbed higher for the third consecutive trading day as the softened USD continued to push up the precious metal, while the risk aversion sentiment may also support its upside momentum. Golf price may head off the next potential long target of around 1, 973 before it retreats.
  • Crude oil was slightly higher after swinging in directions as traders might have lost the plot after the EIA reported less-than-expected stockpiles, but the inventory number reached a 16-month high of 820.14 million due to an outage in the refinery. 

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