Stocks finish mixed as investors evaluate deluge of earnings

US stocks rebounded from steep losses to close mixed on Wednesday after lackluster forecasts from Microsoft ( MSFT ) and other companies that reported earnings weighed on the market for much of the session.

The S&P 500 (^GSPC) was just below flat, and the Dow Jones Industrial Average (^DJI) turned positive, capping the day just above break-even. The tech-heavy Nasdaq Composite (^IXIC) fell 0.2%.

Investors continued to barrel through a light earnings season, with reports from names including Tesla ( TSLA ), IBM ( IBM ), and AT&T ( T ) all in line for Wednesday.

Microsoft stock was down just 0.6% after falling nearly 4% on the day after the company issued a weak earnings outlook. Last quarter results showed a slowdown in its cloud computing business, offsetting hopes for better-than-expected earnings. Its findings come after the megacap giant laid off about 10,000 workers last week, citing pressure from AI.

Separately, Microsoft suffered a global network outage on Wednesday morning in its Azure cloud platform, as well as offerings including Teams and Outlook.

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Elsewhere in stock moves, shares of Texas Instruments ( TXN ) fell 1.1% after the chip maker posted its worst sales decline since 2020, and revenue fell to $4.17 billion from $4.53 billion. Other semiconductors also fell after the results.

“As we expected, our results reflect weaker demand in all end markets except automotive,” CEO Rich Templeton said in the company’s earnings statement.

Shares of Fox (FOX) and News Corp. rose. (NWSA) 2.3% and 5.7%, respectively, after media mogul Rupert Murdoch scrapped plans for a proposed Fox-News Corp. merger. The companies were separated ten years ago.

An exterior view of the Federal Reserve Bank of New York on January 18, 2023 in New York City.  - Wall Street stocks rose early on January 18, 2023, after easing concerns about further moves by the Federal Reserve to aggressively fight inflation following the latest economic data from the US.  (Photo by ANGELA WEISS / AFP) (Photo by ANGELA WEISS/AFP via Getty Images)

An exterior view of the Federal Reserve Bank of New York on January 18, 2023 in New York City. – Wall Street stocks rose early on January 18, 2023, after easing concerns about further moves by the Federal Reserve to aggressively fight inflation following the latest economic data from the US. (Photo by ANGELA WEISS / AFP) (Photo by ANGELA WEISS/AFP via Getty Images)

Despite Wednesday’s declines and a few other sessions down this year, stocks are on an upward path in the first few weeks of January. Gains were particularly concentrated across technology stocks, with the Nasdaq Composite up about 8% year to date.

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“So far, price action in January 2023 is very similar to that of July 2022 when risk assets rose and rates fell as investors bought into the idea of ​​a ‘soft landing’ – the a notion that growth would slow inflation and avoid the need. for more Fed hikes,” said Gargi Chaudhuri, head of iShares, Americas investment strategy at BlackRock in a note. “That argument became stale and price action went back as the firm was at the Fed and went on to rate hikes. raising policy by 75 basis points in September.”

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“Fast forward to now, many investors seem convinced that inflation is almost over and that slower growth will not only obviate the need for further hikes, but even allow the Fed to cut rates before the end of the year ,” she said. .

Despite messages from Federal Reserve policymakers that interest rates will rise above 5%, the markets are pricing in a lower terminal rate in anticipation of a change to 25 basis points at the next meeting Jan. 31-Feb. . 1.

CME’s FedWatch Tool, a tool that gauges investors’ expectations about US rates and monetary policy, shows markets are pricing in a 98.1% chance of a 0.25% increase next week – down slightly from an earlier high of 99.8% this week.

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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