The Market News Today: Investors Await Earnings Reports; Spotlight on Microsoft

Procter & Gamble’s Earnings Report: Flat Growth Expected Amid Market Challenges

Procter & Gamble is set to release its fiscal fourth-quarter earnings before the opening on Tuesday, with analysts projecting flat earnings at $1.37 per share and a modest 1% revenue increase to $20.8 billion. Jefferies analyst Kaumil Gajrawala downgraded PG to Hold, anticipating weak guidance due to declining U.S. consumption and limited pricing flexibility. While China remains a potential growth driver, beauty sales trends are weak, and the timeline for recovery is uncertain. The company faces headwinds in maintaining growth amid changing market conditions.

Microsoft’s Q4 Earnings: Azure Cloud and AI Investments Take Center Stage

Microsoft will release its fiscal fourth-quarter earnings after Tuesday’s close, with analysts focusing on Azure cloud growth, capital expenditure trends, and AI investment returns. Despite tight IT budgets, UBS analyst Karl Keirstead notes bullish Azure demand signals and views Microsoft as well-positioned in the AI market. The company’s stock is considered reasonably priced given its AI leverage and strong earnings growth. Analysts project a 8.9% year-over-year increase in earnings and a 14.5% rise in revenue to $64.4 billion for Q4.

Futures Inch Up as Investors Eye Earnings and Fed Meeting

Stock futures edged higher Tuesday morning as investors await crucial earnings reports and the start of the Federal Reserve’s policy meeting. Major companies like Merck, Pfizer, PayPal, and JetBlue are set to report before the bell, while Advanced Micro Devices and Starbucks will release results after market close. Over 40% of S&P 500 companies have already reported, with 79% surpassing Wall Street expectations. The Fed’s two-day meeting begins today, with traders anticipating signals about potential rate cuts. Job openings (JOLTS) and consumer confidence data are also on the agenda, adding to the day’s economic focus.

Delta Seeks Damages from CrowdStrike and Microsoft After Costly Outage

Delta Air Lines has hired prominent attorney David Boies to pursue damages against CrowdStrike and Microsoft following a massive outage on July 19. The incident, caused by a CrowdStrike software update, led to thousands of flight cancellations and an estimated $350-500 million loss for Delta. CrowdStrike’s shares tumbled 5% on the news, while Microsoft saw a slight dip. The outage affected multiple industries, with Fortune 500 companies potentially losing $5.4 billion collectively. Delta is now handling over 176,000 refund requests as a result.

Homebuilding Stocks Poised for Squeeze as Buying Momentum Increases, S3 Reports

S3 Partners predicts homebuilding stocks are becoming more susceptible to a short squeeze due to rising consumer demand and long buying momentum. Recent data shows $40 million of shares bought to cover short positions in the past week. Short sellers have suffered significant losses, with $959 million mark-to-market losses year-to-date. The SPDR S&P Homebuilders ETF (XHB) has outperformed the S&P 500, gaining 16% in July and 23% in 2024, indicating strong sector performance and potential for further short covering.