Here are five things you must know for Wednesday, Jan. 27:
Stock futures pointed lower Wednesday following earnings from Microsoft ((MSFT)) – Get Report and ahead of reports from Tesla ((TSLA)) – Get Report and Apple (AAPL) – Get Report, and as investors turned their attention to the conclusion of the Federal Reserve’s policy meeting.
Contracts linked to the Dow Jones Industrial Average fell 316 points and S&P 500 futures declined 42 points. Nasdaq futures were down 56 points but had traded higher earlier after Microsoft‘s fiscal second-quarter sales rose more than expected.
Sentiment was weighed down by uncertainty surrounding President Joe Biden‘s $1.9 trillion coronavirus relief given the slim majority of the Democrats in the Senate, and data showing that confirmed global cases of Covid-19 surpassed 100 million.
Stocks finished modestly lower Tuesday following a number of solid earnings reports, but gains were held back by the possibility that a U.S. coronavirus relief package could be delayed.
2. — Microsoft Sales Get Lift From Surge in Cloud Revenue
Microsoft was rising in premarket trading Wednesday after the software giant posted much stronger-than-expected fiscal second-quarter earnings thanks in part to a surge in cloud revenue and a big jump in personal computer sales.
Earnings at Microsoft were $2.03 a share, well ahead of the Wall Street forecast of $1.64. Revenue rose a more-than-expected 17% to $43.1 billion, topping analysts’ estimates of $40.2 billion.
Intelligent cloud revenue rose 23% from last year to $14.6 billion, with server products and cloud services sales rising 26%, driven by a 50% surge in revenue at Azure, Microsoft’s cloud-computing cloud division.
Personal computing revenue rose 14% to $15.1 billion.
“What we have witnessed over the past year is the dawn of a second wave of digital transformation sweeping every company and every industry,” said CEO Satya Nadella. “Building their own digital capability is the new currency driving every organization’s resilience and growth. Microsoft is powering this shift with the world’s largest and most comprehensive cloud platform.”
For the third quarter, revenue at Microsoft‘s intelligent cloud segment was forecast at between $14.7 billion and $14.95 billion, an outlook that at the midpoint topped analysts’ estimates of about $14.1 billion.
Total revenue for the quarter was forecast at $40.35 billion to $41.25 billion, well ahead of expectations of $38.74 billion.
“There isn’t too much more to it other than to acknowledge that global productivity has rapidly shifted from central office locations to dispersed work environments and Microsoft is at the heart of it all,” said Jim Cramer and the Action Alerts PLUS team, which holds Microsoft in its portfolio.
The stock rose 1.63% to $236.11 in premarket trading Wednesday.
3. — Wednesday’s Calendar: Boeing, AT&T and Facebook Earnings
AT&T (T) – Get Report reported fourth-quarter adjusted earnings of 75 cents a share, 2 cents higher than Wall Street forecasts. Revenue of $45.69 billion also beat forecasts.
Earnings reports are expected Wednesday from Tesla, Apple, Facebook (FB) – Get Report, Abbott Laboratories (ABT) – Get Report, Levi Strauss (LEVI) – Get Report, Las Vegas Sands (LVS) – Get Report, Lam Research (LRCX) – Get Report, Norfolk Southern (NSC) – Get Report, General Dynamics (GD) – Get Report, Crown Castle (CCI) – Get Report and ServiceNow (NOW) – Get Report.
The U.S. economic calendar on Wednesday includes an announcement on interest rates from the Federal Reserve at 2 p.m. ET followed by a press conference with Fed Chairman Jerome Powell at 2:30 p.m.
The Fed isn’t expected to move on interest rates and has signaled it will keep them near zero through 2023. Many Fed-watchers expect the central bank likely will reiterate Wednesday its commitments to keep rates near zero and make billions in monthly bond purchases until at least the end of the year.
The calendar also includes Durable Goods Orders for December at 8:30 a.m. and Oil Inventories for the week ended Jan. 22 at 10:30 a.m.
4. — Walgreens Names Roz Brewer as CEO
Walgreens Boots Alliance (W(BA)) – Get Report named Roz Brewer, the outgoing chief operating officer of Starbucks (SBUX) – Get Report, as chief executive of the drugstore chain.
Brewer will become the only current Black female CEO in the S&P 500 index, according to Bloomberg.
Brewer will be taking over from billionaire Stefano Pessina, who has been CEO since 2015.
Pessina, who owns more than 16% of Walgreens, will become executive chairman.
Brewer’s digital expertise made her an ideal candidate to oversee the company’s transformation, Pessina told Bloomberg. That and her leadership skills will make up for her lack of experience in the healthcare industry, he said.
Shares of Walgreens jumped 4.7% to $51.50 in premarket trading.
5. — GameStop Rally Called ‘Insane’ and ‘Dangerous’ by Michael Burry
The 642% surge in GameStop (GME) – Get Report since Jan. 12 and it’s gain of more than 3,400% in the past 12 months was called “unnatural, insane, and dangerous” by famed fund manager Michael Burry.
“If I put $GME on your radar, and you did well, I’m genuinely happy for you,” said Burry in a tweet. “However, what is going on now – there should be legal and regulatory repercussions. This is unnatural, insane, and dangerous.”
Burry is the head of Scion Asset Management. He was a major character in “The Big Short” book and film, which were based on his bet against the U.S. housing market.
He told Bloomberg he was “neither long nor short” GameStop. His investment firm owned a 2.4% stake as of Sept. 30 after paring its holdings in the third quarter, according to regulatory filings compiled by Bloomberg.
Burry drew attention to GameStop back in mid-2019 when his firm unveiled a 3.3% stake in the video game retailer.
The stock was up more than 66% in premarket trading to $246.
Jim Cramer Says GameStop Shorts Deserved Short Squeeze