Microsoft Rout Weighs on the Broader Market

The S&P 500 Index ($SPX) (SPY) on Thursday closed down -0.13%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.11%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.53%.  March E-mini S&P futures (ESH26) fell -0.20%, and March E-mini Nasdaq futures (NQH26) fell -0.57%.

Stock indexes settled mostly lower on Thursday, with the S&P 500 and Dow Jones Industrial Average falling to 1-week lows.   AI spending worries weighed on stocks on Thursday, as Microsoft sank -10% after reporting underwhelming growth in its cloud business and higher-than-expected expenses. The rout in Microsoft undercut most Magnificent Seven technology stocks, sans Meta Platforms and Apple, and weighed on the broader market. 

Meta Platforms rallied by more than 10% on Thursday and was a positive factor for the market after providing a revenue outlook that was much stronger than expected.  Also, International Business Machines rose by more than 5%, and Honeywell International climbed by 4% to help the Dow Jones Industrial Average recover from a 1-week low and push into positive territory after they reported better-than-expected Q4 earnings results. 

Stocks recovered from their worst levels on Thursday on signs that a deal to fund the government was close at hand.  Senate Majority Leader Thune said an emerging deal would put the Department of Homeland Security on temporary stopgap funding while other agencies would get funding through September 30.  Without an agreement, government funding will lapse on Saturday for much of the federal government. 

WTI crude oil (CLH26) prices jumped more than +3% to a 4.25-month high on Thursday to lift energy producers after President Trump on Wednesday said that he wants Iran to come to the table and negotiate a nuclear deal that is “a fair and equitable deal with No Nuclear Weapons.”  He warned Iran that time is running out to make a deal with the US, noting that a fleet of US warships entering the region is ready to complete their mission “with speed and violence.”

US weekly initial unemployment claims fell -1,000 to 209,000, showing a slightly weaker labor market than expectations of 205,000. However, continuing claims fell -38,000 to a 6-month low of 1.827 million, showing a stronger labor market than expectations of 1.850 million.

The US Nov trade deficit was -$56.8 billion, wider than expectations of -$44.0 billion and the largest deficit in 4 months.

US Nov factory orders rose +2.7% m/m, stronger than expectations of +1.6% m/m and the largest increase in 6 months.

Threats to stocks and the dollar remain.  President Trump has threatened new 100% tariffs on US imports from Canada, the possibility of a US government shutdown over ICE funding, and lingering concerns about Greenland. 

The market’s focus this week will be on new tariff news and the prospects for a continued resolution (CR) to fund the government.  On Friday, Dec PPI final demand is expected to ease to +2.8% y/y from +3.0% y/y in Nov, and Dec PPI ex-food and energy is expected to ease to +2.9% y/y from +3.0% y/y in Nov.  Also, the Jan MNI Chicago PMI is expected to climb by +0.8 to 43.5.

Q4 earnings season is in full swing, with 102 of the S&P 500 companies scheduled to report earnings this week.  Apple reports after the close today.  Earnings have been a positive factor for stocks, with 77% of the 143 S&P 500 companies that have reported beating expectations.  According to Bloomberg Intelligence, S&P earnings growth is expected to climb by +8.4% in Q4.  Excluding the Magnificent Seven megacap technology stocks, Q4 earnings are expected to increase by +4.6%.

The markets are discounting a 14% chance for a -25 bp rate cut at the next policy meeting on March 17-18.

Overseas stock markets settled mixed on Thursday.  The Euro Stoxx 50 fell to a 1-week low and closed down by -0.70%.  China’s Shanghai Composite climbed to a 2-week high and closed up +0.16%.  Japan’s Nikkei Stock 225 closed up +0.03%.

Interest Rates

March 10-year T-notes (ZNH6) on Thursday closed up by +7 ticks.  The 10-year T-note yield fell -1.6 bp to 4.227%.  T-note prices recovered from early losses on Thursday and turned higher after a slump in stocks boosted some safe-haven demand for government debt.  Also, Thursday’s report on weekly jobless claims was higher than expected, a supportive factor for T-notes. 

Gains in T-notes were limited with Thursday’s 3% jump in crude oil prices to a 4.25-month high, which boosted inflation expectations.  Also, slack demand for the Treasury’s $44 billion auction of 7-year T-notes was negative for T-notes, as the auction had a bid-to-cover ratio of 2.45, below the 10-auction average of 2.54. 

European government bond yields moved lower on Thursday.  The 10-year German bund yield slid to a 1.5-week low of 2.821% and finished down -1.7 bp to 2.840%.  The 10-year UK gilt yield fell from a 2.25-month high of 4.566% and finished down by -3.3 bp at 4.511%.

The Eurozone Jan economic confidence indicator rose +2.2 to a 3-year high of 99.4, stronger than expectations of 97.1.

Eurozone Dec M3 money supply rose +2.8% y/y, weaker than expectations of +3.0% y/y.

Swaps are discounting a 0% chance of a +25 bp rate hike by the ECB at its next policy meeting on February 5.

US Stock Movers

Cryptocurrency-exposed socks retreated on Thursday as Bitcoin (^BTCUSD) fell more than -5% to a 2.25-month low. Strategy (MSTR) closed down more than -9%, and Galaxy Digital Holdings (GLXY) closed down more than -6%.  Also, Coinbase (COIN) and MARA Holdings (MARA) closed down more than -4%, and Riot Platforms (RIOT) closed down more than -3%.

Microsoft (MSFT) closed down more than -10% to lead losers in the Dow Jones Industrials on disappointment that Q2 Azure and other cloud services revenue ex-forex could not beat expectations, up +38% y/y and right on consensus. 

Las Vegas Sands (LVS) closed down more than -13% to lead losers in the S&P 500 after reporting its Q4 Macau operations adjusted property Ebitda of $608 million, weaker than the consensus of $626.1 million. 

United Rentals (URI) closed down more than -12% after reporting Q4 revenue of $4.21 billion, weaker than the consensus of $4.25 billion, and forecasting full-year revenue of $16.8 billion to $17.3 billion, the midpoint below the consensus of $17.14 billion.

HubSpot (HUBS) closed down more than -11% after BMO Capital Markets cut its price target on the stock to $385 from $465.

ServiceNow (NOW) closed down more than -10% after reporting Q4 adjusted gross margin of 80.5%, weaker than the consensus of 81.2%. 

Tractor Supply Co (TSCO) closed down more than -7% after reporting Q4 net sales of $3.90 billion, weaker than the consensus of $3.99 billion, and forecasting full-year comparable sales up +1% to +3%, the midpoint below the consensus of +2.96%. 

Whirlpool (WHR) closed down more than -5% after reporting Q4 net sales of $4.10 billion, below the consensus of $4.26 billion, and forecasting full-year ongoing EPS of about $7.00, weaker than the consensus of $7.23.

Dow Inc. (DOW) closed down more than -2% after reporting Q4 net sales of $9.46 billion, below the consensus of $9.50 billion. 

Meta Platforms (META) closed up more than +10% to lead gainers in the Nasdaq 100 after reporting Q4 revenue of $59.89 billion, better than the consensus of $58.42 billion, and forecasting Q1 revenue of $53.5 billion-$56.5 billion, well above the consensus of $51.27 billion. 

International Business Machines (IBM) closed up more than +5% to lead gainers in the Dow Jones Industrials after reporting Q4 revenue of $19.69 billion, stronger than the consensus of $19.21 billion.

Southwest Airlines (LUV) closed up more than +18% to lead gainers in the S&P 500 after forecasting Q1 adjusted EPS of at least 45 cents, well above the consensus of 28 cents. 

Royal Caribbean Cruises Ltd (RCL) is up more than +18% to lead cruise stocks higher after forecasting full-year adjusted EPS of $17.70 to $18.10, stronger than the consensus of $17.67.  Also, Norwegian Cruise Line Holdings (NCLH) closed up more than +10%, and Carnival (CCL) closed up more than +8%.

Honeywell International (HON) closed up more than +4% after forecasting full-year adjusted EPS of $10.35 to $10.65, the midpoint better than the consensus of $10.41.

C.H. Robinson Worldwide (CHRW) closed up more than +4% after reporting Q4 adjusted diluted EPS of $1.23, better than the consensus of $1.13. 

Lockheed Martin (LMT) closed up more than +3% after forecasting full-year EPS of $29.35 to $30.25, well above the consensus of $29.09.

Earnings Reports(1/30/2026)

Air Products and Chemicals Inc (APD), American Express Co (AXP), Aon PLC (AON), Charter Communications Inc (CHTR), Chevron Corp (CVX), Church & Dwight Co Inc (CHD), Colgate-Palmolive Co (CL), Exxon Mobil Corp (XOM), Franklin Resources Inc (BEN), LyondellBasell Industries NV (LYB), Regeneron Pharmaceuticals Inc (REGN), Verizon Communications Inc (VZ).