Premarket: Stocks are eager for a turnaround. that won’t help

What’s happening: Microsoft now expects revenue between $51.9 billion and $52.7 billion between April and June, about $460 million below the previous estimate. He cited “unfavorable exchange rate movements” through May.

What Microsoft was referring to was the skyrocketing US dollar. Last month, it hit its strongest level against other major currencies in about two decades. Since then, it has fallen back, but continues to rise by more than 6% year-to-date.
The dollar’s rally is being fueled by rising interest rates in the US, which is raising interest from foreign investors eager for higher net returns. And while U.S. recession risks are mounting, economic conditions look much more solid than in Europe, which has greater exposure to the war in Ukraine, and China, which is just beginning to lift strict coronavirus restrictions in major cities. .

“The rest of the world is aggressively decelerating,” 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 consequences for US companies with a global presence, making it harder for customers in other countries to buy their products and reducing the value of international sales and profits.

“They will have less earnings abroad,” Rochester said.

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

Sales force (CRM) raised its full-year profit forecast late last month, but slightly lowered its revenue forecast, citing currency swings.

The market took Microsoft’s warning calmly. Nicholas Colas, co-founder of DataTrek Research, said this could encourage other companies to follow suit and tell investors that their results might not be as rosy as they had anticipated.

But he cautioned that Wall Street might not respond so optimistically on all counts. Microsoft, he said, is an “extremely well-run company with a strong competitive advantage that is yet to increase earnings this quarter and next.”

“How the market handles negative guidance from second-tier companies will be the true indicator of whether all the bad news is related to stock prices,” Colas said.

The conclusion: some investors who have been waiting on the sidelines are eager to start diving back into the market, discovering opportunities to buy stocks at more attractive prices. But a wave of negative earnings guidance — because of the dollar’s strength or other factors — could drive stocks even lower as Wall Street recalibrates expectations.

Is Apple about to tease your vision of the metaverse?

Litter (AAPL) is holding its annual developer conference this week, where it is expected to show new software coming to its most popular devices.

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

Other rumors point to new features of the TV operating system, which can be linked to the smart home; an update to the Apple Watch OS that would increase battery life; and a new MacBook Air.

That’s not all: some analysts think Apple could offer a preview of a platform called RealityOS. The system can power the mixed reality headset — a wearable device said to be capable of both virtual and augmented reality — that Apple has been working on for years.

Daniel Ives, an analyst at Wedbush Securities, has taken to calling the potential hardware product “Apple Glasses,” an apparent allusion to Google’s failed foray into smart glasses. In an investor note this week, Ives said he expects Apple to “get right on a number of AR/VR technologies for developers that the company plans to introduce.”

“Ultimately, this strategy is laying the breadcrumbs for the highly anticipated Apple Glasses AR headset, which is likely to debut before the holiday season or early 2023,” he said.

Cook has long talked about Apple’s vision to delve deeper into AR, calling it “the next big thing” and “a critically important part of Apple’s future.”

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

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

Boris Johnson’s leadership is at risk. The markets are shrugging their shoulders

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

The calculation: if 180 Conservative lawmakers – a simple majority – vote against Johnson, he will cease to be leader of the Conservative Party and be removed from office, less than three years after winning a general election by a landslide. If Johnson wins the vote, he will remain party leader and prime minister.

Johnson’s presidency has been rocked by the “Partygate” scandal, with months of allegations of parties and gatherings at the heart of his administration during various stages of the pandemic lockdown eroding confidence in his leadership.

A damning report by a top civil servant, published late last month, found a culture of partying and socializing among Johnson’s team, while millions of Britons were banned from seeing their friends and relatives. He was also criticized for his response to the cost-of-living crisis.

Johnson could cling to power. Several of his top ministers have voiced their support, including Chancellor Rishi Sunak, who said he will “continue to support him as we focus on growing the economy, dealing with the cost of living and cleaning up Covid backlogs.”

While investors generally like stability, it could actually hurt UK assets this time around, given the Johnson administration’s ambiguous agenda, especially in the economy. The pound sterling – 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 broadcast live. It is scheduled to start at 1 pm ET.

Starting tomorrow: Earnings from JM Smucker (SJM) and US consumer credit data for April.

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