Stock futures trade lower after last night’s stunning late-session rally; IBM shares leap after solid Q2 earnings, cloud revenue outlook; Microsoft earnings to put gaming, cloud divisions in focus; Tesla moves closer to investment grade rating after Moody’s boost and Nvidia shares slide after a report says its $40 billion Arm deal may be dead.
Here are five things you must know for Tuesday, January 25:
1. — Stock Futures Lower After Stunning Late-Session Rally
U.S. equity futures traded lower Tuesday, following on from a furious late-session rally on Wall Street that lifted the Dow from an 1,000 point-plus decline to a modest closing bell, as investors look to a slate of top-tier earnings and the start of the Federal Reserve’s two-day policy meeting.
Russia tensions remain a cloud over markets as well, with NATO declaring late Monday that it’s putting troops in the region on standby, and beefing-up its military presence in Eastern Europe, amid a massing of soldiers near the Ukraine border. President Joe Biden has also put more than 8,000 U.S. servicemen and women on high alert.
Market concerns regarding the Fed’s near-term policy tract, however, loom larger heading into the start of the Tuesday session, as slowing growth figures, alongside rising inflation data, puts the central bank’s plans for a series of 2022 rate hikes in a different light.
How companies manage their way through that — as well as ongoing issues in global supply chains and rising employment costs — will likely be in focus today as investors get December quarter updates from Johnson & Johnson (JNJ) – Get Johnson & Johnson Report, General Electric (GE) – Get General Electric Company Report, 3M (MMM) – Get 3M Company Report, Verizon (VZ) – Get Verizon Communications Inc. Report and Lockheed Martin (LMT) – Get Lockheed Martin Corporation Report prior to the start of trading.
Collective S&P 500 profits are forecast to rise 23.1% for the fourth quarter, to $434.4 billion, before slowing to just 7.5% for the first three months of the year.
On Wall Street, futures tied to the Dow are indicating a 190 point opening bell decline following last night’s 3.5% peak-to-trough rally, while those linked to the S&P 500 are priced for a 48 point retreat. Nasdaq Composite futures are indicating a 235 point slide.
The CBOE Group’s VIX volatility gauge, however, remains within touching distance of its one-year high, suggesting another wild ride Tuesday, particularly now that benchmark 10-year note yields are closing in on 1.8% in the overnight trading session.
2. — IBM Shares Leap After Solid Q4 Earnings, Cloud Forecast
International Business Machines (IBM) – Get International Business Machines Corporation Report shares jumped higher in pre-market trading after posting stronger-than-expected fourth quarter earnings late Monday in the first update since shedding its legacy infrastructure business to focus on cloud computing growth.
IBM notched double-digit revenue growth rates in both its cloud and consulting businesses over the three months ending in December, with an overall topline of $16.7 billion. Adjusted earnings of $3.35 per share also beat Street forecasts.
Looking into the start of the year, IBM said overall revenues will grow by a ‘mid-single-digit’ percentage as it navigates a competitive cloud space, dominated by the likes of Amazon (AMZN) – Get Amazon.com, Inc. Report, Google (GOOGL) – Get Alphabet Inc. Class A Report and Microsoft (MSFT) – Get Microsoft Corporation Report, under CEO Arvind Krishna.
IBM shares were marked 2.7% higher in pre-market trading to indicate an opening bell price of $132.30 each.
3. — Microsoft Earnings To Put Cloud, Gaming Divisions in Focus
Microsoft (MSFT) – Get Microsoft Corporation Report shares edged lower in pre-market trading ahead of the group’s key fourth quarter earnings, which arrive after the close of trading,
Microsoft, which briefly overtook Apple (AAPL) – Get Apple Inc. Report as the world’s most valuable company earlier this year, is expected to see revenues rise past $50 billion for the three months ending in December, the group’s fiscal second quarter, powered by gains in its cloud-computing division, with an adjusted bottom line of $2.31 per share.
Microsoft has forecast cloud revenues of just over $18 billion for the second quarter, as its Azure offering gains market share and benefits from the rollout of Arc, which helps big companies manage applications at the edge or in the multi-cloud space.
The group could also provide further detail on its planned $69 billion takeover of videogame maker Activision Blizzard (ATVI) – Get Activision Blizzard, Inc. Report, the biggest deal in Microsoft’s history, and its role in growing sales of both its XBox console and boosting broader gaming sector revenues.
Microsoft shares were marked 0.5% lower in pre-market trading to indicate an opening bell price of $295.00 each.
4. — Tesla Gets Closer to Investment Grade Rating After Moody’s Boost
Tesla (TSLA) – Get Tesla Inc Report shares moved lower in pre-market trading after analysts at Moody’s Investors Service boosted their credit rating on the carmaker to the edge of investment grade status.
Moody’s pegged its assessment on Tesla at Ba1, a two-notch improvement from its prior credit grade and just one level below the investment grade threshold, citing a prudent financial policy, solid liquidity and a ‘considerable’ increase in cash flow over the 2022 calendar year.
Tesla is expected to deliver nearly 1.4 million cars this year, Moody’s said, a near 50% increase from its 2021 tally of 936,000 as capacity from new factories in Germany and Texas comes fully online.
Tesla shares were marked 1.75% lower in pre-market trading to indicate an opening bell price of $913.80 each. The group will publish fourth quarter earnings after the close of trading Wednesday.
5. — Nvidia Shares Slide As Report Suggests $40 Billion Arm Deal In Doubt
Nvidia (NVDA) – Get NVIDIA Corporation Report shares slumped lower in pre-market trading amid reports that the chipmaker is ready to abandon its $40 billion takeover of U.K.-based Arm Holdings.
Bloomberg News reported Tuesday that Japan-based Softbank, which purchased Arm for around $32 billion in 2016, is looking to list the chip designing business as it grows increasingly concerned that regulators on both sides of the Atlantic, as well as in China, express concerns over the impact of the deal.
Britain’s Competition and Markets Authority raised ‘serious competition concerns’, and called for an in-depth investigation into the $40 billion deal in August, while the U.S. Federal Trade Commission sued to block the deal in early December, alleging that the combined firm” would have the means and incentive to stifle innovative next-generation technologies, including those used to run datacenters and driver-assistance systems in cars.”
Nvidia shares were marked 2.8% lower in pre-market trading Tuesday to indicate an opening bell price of $227.26 each.
