US stocks are declining after a couple of major tech warnings are making traders nervous about a macro slowdown. Stock bulls may hate but it ain’t no lie, it is time to say Bye Bye Bye to a soft landing.
Tech earnings from Microsoft to Texas Instruments clearly painted a picture of a macro slowdown. The January rally might be over if the rest of the big-tech earnings and multi-nationals paint the same downbeat picture.
Microsoft/Texas Instruments
Microsoft shares tumbled after delivering soft guidance that reinforced big-tech fears of a major slowdown. Microsoft Cloud gains are about to take a turn for the worse and investors might not hesitate abandoning ship until we see a retest of last year’s low. This rough patch will pass, but short-term selling pressure might remain strong.
The earnings call was rather downbeat. Microsoft CFO Hood said, “we are seeing customers exercise caution in this environment, and we saw results weaken thru December. We saw moderated consumption growth in Azure and lower-than-expected growth in new business across the standalone Office 365, EMS, and Windows Commercial products that are sold outside the Microsoft 365 suite.”
Texas Instruments shares also declined after the chipmaker posted its first decline in sales since 2020. The outlook was rather bleak as it seems it will take a while before sales can rebound. The company will look to reduce its inventory, which should be a good sign for disinflation trends.
Texas Instruments shares initially rallied yesterday after posting an earnings beat, but that quickly disappeared after traders digested the guidance and saw what happened with Microsoft.
BOC
The Bank of Canada appears to be done with raising rates. The BOC raised rates by 25 bps to 4.50%. The statement noted that the Bank “expects to hold the policy rate at its current level while it assesses the impact of the cumulative interest rate increases.”
The central bank is still concerned over high and broad-based inflation, but they are expecting for that to improve. If a global macro slowdown is here, inflation will continue to decline and the BOC could keep rates here for a while.
The Canadian dollar declined as dovish bets now fully price in a rate cut at the December meeting. BOC Governor Macklem noted that this will be a “conditional” pause that depends on the economy evolving in line with its latest quarterly forecasts.
Bitcoin is lower as a broader selloff on Wall Street has a lot of traders entering into de-risking mode. The January stock market rally might be over and that could drag crypto lower here. Bitcoin could be vulnerable to a dip towards $20,000 level if the tech-driven selloff on Wall Street intensifies over the next couple of days.
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Ed Moya
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