Premarket: stocks are looking for a reversal. it won’t help

What’s happening: Microsoft now expects $51.9 billion to $52.7 billion in revenue between April and June, about $460 million less than its previous estimate. He cited “unfavorable exchange rate movements” during May.

What Microsoft had in mind was A dizzying rally in the US dollar. Last month, it reached its strongest level against other major currencies in about two decades. It has fallen since then, but has remained up more than 6% since the start of the year.
The dollar’s rise is fueled rise in interest rates in the United States, which increases interest from foreign investors seeking higher returns. And while the risks of a recession in the US are rising, economic conditions look much stronger than in Europe, which is more affected by the war in Ukraine, and in China, which is just beginning to lift severe coronavirus restrictions in big cities.

“The rest of the world is slowing aggressively,” Jordan Rochester, currency strategist at Nomura, told me.

The strength of the dollar is a sign of confidence in the US economy. But it also has implications for American firms with a global presence, making it harder for customers in other countries to afford their products and lowering the cost of international sales and profits.

“They will have less income from abroad,” Rochester said.

Microsoft is not the only member of Corporate America to indicate that its results will be affected by the dollar’s rapid rise.

sales department (CRM) raised its earnings forecast for the year at the end of last month, but lowered revenue forecast slightly, citing currency fluctuations.

The market took Microsoft’s warning calmly. Nicholas Kolas, co-founder of DataTrek Research, said this could encourage other companies to follow suit and let investors know their results may not be as rosy as they predicted.

But he warned that Wall Street might not be as optimistic across the board. Microsoft, he says, is “a very well-managed company with a strong competitive edge that is expected to see earnings growth this quarter and next.”

“How the market handles the negative outlook for second-tier companies will be a real indicator of whether all the bad news is priced into stocks,” Colas said.

Conclusion: Some investors who have been waiting on the sidelines are looking to plunge back into the market, looking for opportunities to buy shares at more attractive prices. But a wave of negative earnings guidance — due to the strength of the dollar or other factors — could send stocks further lower as Wall Street revisits expectations.

Is Apple going to tease its vision for the metaverse?

Apple (AAPL) keeps his annual developer conference this week, where the company is expected to showcase new software for its most popular devices.

Details, details: The Worldwide Developers Conference kicks off virtually on Monday and runs through Friday. Apple is due to unveil its latest operating system, iOS 16, which could reportedly include a revamped notification center and lock screen for the iPhone, as well as new health and social features for iMessage.

Other rumors point to new TV OS features that could be smart home related; upgrade to Apple Watch OS, which will increase battery life; and the new MacBook Air.

That’s not all: some analysts believe that Apple may offer a sneak peek at a platform called RealityOS. The system can power a mixed reality headset — a wearable device said to be capable of both virtual and augmented reality — that Apple has been rumored to have been working on for years.

Daniel Ives, an analyst at Wedbush Securities, called the possible hardware product “Apple Glasses,” a nod to Google’s failed attempt at smart glasses. In a note to investors this week, Ives said he expects Apple to “offer developers a range of AR/VR technologies that the company plans to introduce.”

“Ultimately, this strategy lays the groundwork for the highly anticipated Apple Glasses AR headset, which will likely debut before the holiday season or early 2023 at the latest,” he said.

Cook has long spoken out about Apple’s push to dive deeper into AR, calling it “the next big thing” and “a critical part of Apple’s future.”

Investor perspective: Apple stock has been hit by a sell-off in the tech sector this year, falling more than 18%. The S&P 500 fell almost 14%.

Could the company’s metaverse ambitions breathe new life into the stock? It’s worth noting that the company’s wearables business, including the Apple Watch, has doubled in three years. It is now almost the size of a Fortune 100 firm in its own right.

Boris Johnson’s leadership is under threat. The markets shrug their shoulders

British Prime Minister Boris Johnson face a vote of confidence on Monday, spurred by disgruntled lawmakers in his own party.

The calculation: If 180 Conservative MPs — a simple majority — vote against Johnson, he will cease to be leader of the ruling Conservative Party and be removed from office less than three years after a landslide victory in the general election. If Johnson wins the vote, he will remain both party leader and prime minister.

Johnson’s premier has been rocked by the Partygate scandal, with months of accusations of partying and gatherings at the core of his government at various stages of the pandemic lockdown shattering the credibility of his leadership.

A damning report by a senior civil servant, released late last month, revealed a culture of partying and socializing among Johnson’s employees, while millions of Britons were barred from seeing their friends and family. He has also been criticized for his response to the cost of living crisis.

Johnson could cling to power. Several of his top ministers have pledged their support, including Chancellor Rishi Sunak, who said he “will continue to support him as we focus on growing the economy, lowering the cost of living and fixing the backlog of Covid issues.”

While investors generally love stability, this could hurt British assets this time around given the Johnson administration’s controversial agenda, especially on the economy. The British pound, which has fallen nearly 8% against the US dollar this year, rose 0.6% to $1.26 on Monday.

Next

The Apple event will be streamed live. It should start at 13:00 ET.

Tomorrow: Income from J. M. Smucker (SZHM) US consumer credit data for April.

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