Skip to main content

Stocks Edge Lower; Microsoft Earnings Leap, Billionaires' Tax Plan - 5 Things You Must Know

Stocks edge lower after record highs; Microsoft tops earnings forecast on cloud strength; Pfizer gets nod for children's vaccine; Democrats unveil billionaires tax' Robinhood shares tumble after softer third quarter revenues.

Here are five things you must know for Wednesday, October 27:

1. -- Stocks Futures  Edge Lower Ahead of Busy Earnings Slate

U.S. equity futures slipped lower Wednesday, putting a two-day run of record highs at risk, as investors brace for another slew of bluechip corporate earnings while tracking a notable jump in short-term Treasury yields.

Boeing  (BA) - Get Free Report, McDonald's  (MCD) - Get Free Report, General Motors  (GM) - Get Free Report and Bristol Meyers  (BMY) - Get Free Report highlight another busy session of corporate earnings Wednesday, with September trade data expected at 8:30 am Eastern time. 

The strength of the third quarter earnings seasons has powered stocks to a series of record highs this month, but creeping inflation concerns, and the uncertainty linked to Democratic tax proposals -- alongside ongoing disruptions in the global supply chain -- remain a constant on the bear side of the market's ledger. 

Market-based gauges for near-term inflation prospects, in fact, are trading the the highest levels in 15 years, while benchmark 2-year note yields topped the 0.5% mark in overnight trading for the first time in 19 months as investors re-set rate expectations ahead of next month's Federal Reserve policy meeting. 

Still, while stronger-than-expected September quarter updates from Microsoft  (MSFT) - Get Free Report and Google  (GOOGL) - Get Free Report, as well as the underlying earnings season momentum, could give stocks a further boost Wednesday, futures are indicating a modestly softer open on Wall Street. 

Contracts tied to the Dow Jones Industrial Average are indicating a 15 point opening bell dip, while those linked to the S&P 500 are priced for a 6 point pullback. Futures tied to the tech-focused Nasdaq Composite are indicating a 22 point slip .

2. -- Microsoft Tops $20 Billion in Q1 Earnings

Microsoft shares jumped higher in pre-market trading after the tech giant posted first quarter profits of more than $20 billion, powered in part by booming demand for its cloud computing services. 

Microsoft said revenues for Azure, its flagship cloud division, rose 48% from last year, helping overall group revenues to a record $45.3 billion for the three months ending in September, Microsoft's fiscal first quarter.  The group's bottom line was also a record, at $20.5 billion. 

Looking into the December quarter, Microsoft said cloud revenues could rise to around $18.2 billion, with gains in personal computing and its business division, but cautioned that supply chain disruptions may hit sales of its popular XBox gaming console.

Microsoft shares were marked 2.32% higher in pre-market trading to indicate an opening bell price of $317.30 each.

3. --  Pfizer Gets Childrens' Vaccine Nod

Pfizer  (PFE) - Get Free Report shares edged higher in pre-market trading after an advisory panel to the Food & Drug Administration recommended its coronavirus vaccine for young children.

The recommendation, which must first be accepted by the FDA and then repeated by the U.S. Centers for Disease Control and Prevention, could mean around 28 million children between the ages of 5 and 11 would be eligible to receive the two-shot vaccine starting as early as next week.

Pfizer, which developed the vaccine alongside its German partner BioNtech, said it can tweak the dose for young children to around 10 micrograms -- around a third of the level used for teenagers -- while still reaching a 90.7% efficacy against the disease.

Pfizer shares were marked 0.23% higher in pre-market trading to indicate an opening bell price of $43.66 each. 

4. --  Democrats Unveil Billionaires' Tax

Senate Democrats unveiled plans for a so-called 'billionaires tax' Wednesday, outlining details for changes in capital gains levies designed to help fund President Joe Biden's broader social spending plans.

Under the proposal, which faces opposition in both the Senate and the House of Representatives -- including from Democratic lawmakers --  Americans who've owned assets worth at least $1 billion for three consecutive years, or who have earned $100 million or more for three years in a row, would pay a capital gains rate of 23.8% even if the assets aren't sold. 

Sponsored by Senate Finance Committee Chairman Ron Wyden, the tax bill would affect around 700 of the nation's wealthiest people and raise around $200 billion over the next ten years. 

5. --  Robinhood Shares Tumble

Robinhood Markets  (HOOD) - Get Free Report shares fell sharply in pre-market trading after the online trading platform posted softer-than-expected third revenue gains amid a slowdown in retail activity. 

Cryptocurrency trading revenues, Robinhood said, fell 78% from the previous quarter to $51 million, while stock trading revenues were down 27% from last year to around $50 million. Funded accounts on the group's platform were near twice the level of last year, at 22.4%, but were largely flat when compared to the three months ending in June.

"Looking back at Q2, we saw a huge interest in crypto, especially doge, leading to large numbers of new customers joining the platform and record revenues," co-founder and CEO Vlad Tenev told investors on a conference call late Tuesday. "In Q3, crypto activity came off record highs, leading to fewer new funded accounts and lower revenue."

Robinhood shares were marked 10.8% lower in pre-market trading to indicate an opening bell price of $35.30 - nearly $3 below its July IPO price.