Summary

• US stocks dropped due to weak forecasts from tech companies including Microsoft
• Amazon and Apple also saw their stocks fall
• Despite these declines, overall stocks have been upward trend in January.

US stocks tumbled on Wednesday, January 25th, 2023, after disappointing forecasts from Microsoft and other corporations reporting earnings dampened the outlook for technology stocks, weighing on the broader market. The S&P 500 (^GSPC) fell by 0.8%, while the Dow Jones Industrial Average (^DJI) shed 185 points, or roughly 0.6%.

The technology-heavy Nasdaq Composite (^IXIC) declined by 1%. Investors continued to assess a mild earnings season, with reports from names including Tesla (TSLA), IBM (IBM), and AT&T (T) all in the queue for Wednesday.

Microsoft's stock fell by 1.4% on Wednesday after the company issued a weak earnings outlook and results for the last quarter showed that its cloud business had slowed, offsetting optimism around earnings that came in better than expected. This news comes after the megacap giant last week laid off roughly 10,000 workers, citing a push into artificial intelligence.

Other technology names also came under pressure. Amazon (AMZN) shares fell by 1.6%, while Apple (AAPL)'s stock sank by 1.5%. Furthermore, Microsoft was experiencing a global network outage on Wednesday morning in its cloud platform Azure, along with offerings including Teams and Outlook.

Elsewhere in stock moves, Texas Instruments (TXN) shares dropped by 1.1% after the chipmaker posted its worst sales decline since 2020, while revenue fell to $4.17 billion from $4.53 billion. Other semiconductors also fell following the results. “As we expected, our results reflect weaker demand in all end markets with the exception of automotive,” CEO Rich Templeton said in the company’s earnings statement.

Shares of Fox (FOX) and News Corp. (NWSA) rose by 2.5% and 5.6%, respectively, after media mogul Rupert Murdoch scrapped plans for a proposed Fox-News Corp merger. The companies were separated a decade ago. Despite Wednesday's declines and a few other downbeat sessions this year, stocks have been on an upward path in the first few weeks of January. Gains have been especially focused across technology stocks, with the Nasdaq Composite up around 8% to date.

"So far, price action in January 2023 bears an eerie resemblance to that in July 2022 when risk assets rallied and rates fell as investors bought into the idea of a 'soft landing' – the notion that slowing growth would slow inflation and obviate the need for further Fed hikes," Gargi Chaudhuri, head of iShares investment strategy, Americas at BlackRock said in a note. "That argument faded and price action reversed as the Fed held firm and went on to hike policy rates by 75 basis points in September."

"Fast forward to now, many investors once again seem convinced that inflation is all but beaten 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 added. Despite messaging from Federal Reserve policymakers that interest rates will rise above 5%, markets are pricing in a lower terminal rate as they anticipate a downshift to 25-basis points at the next meeting Jan. 31-Feb. 1.

In summary, US stocks dropped on Wednesday due to weak forecasts from Microsoft and other companies reporting their earnings, which negatively impacted technology stocks and the overall market. Companies such as Amazon and Apple also saw their stocks fall. Additionally, Microsoft experienced a global network outage in its Azure cloud platform, Teams, and Outlook. Other companies such as Texas Instruments, Fox, and News Corp also saw changes in their stock prices.