Wall St falls as Microsoft forecast hits tech stocks, earnings disappoint

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Microsoft falls on dismal Q3 cloud outlook

Salesforce, Amazon, other cloud-based stocks drop

Tech shares lead sectoral declines on S&P 500

Boeing slides after missing Q4 revenue estimates

Indexes down: Nasdaq 2.0%, S&P 1.2%, Dow 0.7%

Adds details; updates prices to open

By Shreyashi Sanyal and Johann M Cherian

Jan 25 (Reuters) -Wall Street's main indexes dropped on Wednesday, with the Nasdaq down 2% as Microsoft's outlook weighed down technology stocks, while a bleak quarterly report from Boeing added to fears of a recession.

Shares of Microsoft MSFT.O fell 3.9% after it warned that growth in its lucrative cloud business could stall, while its PC unit continued to struggle. The S&P 500 technology index .SPLRCT shed 2.1% to lead declines among the 11 major sector indexes.

Amazon.com Inc AMZN.O, Salesforce Inc CRM.N and ServiceNow Inc NOW.N, which have substantial cloud businesses, fell between 2.5% and 4.5%.

Other major growth stocks, including Apple Inc AAPL.O, Alphabet Inc GOOGL.O and Tesla Inc TSLA.O, also dropped between 1.5% and 3.0%.

Growth stocks, however, have enjoyed a bounce in January after a battering last year, with investors now focused on earnings reports to assess the impact of the Federal Reserve's rate hikes and to gauge whether the renewed enthusiasm for these stocks will be sustained.

"The environment may look attractive because some of these cloud companies, like Salesforce, are down so much, but people are still skeptical because we're heading into weaker economic news," said Robert Pavlik, senior portfolio manager at Dakota Wealth.

"We still have inflation, we still have the Fed raising interest rates, we're seeing companies laying off thousands of peoples ... We're not completely through the cycle yet."

An overwhelming majority of traders expect the Federal Reserve to raise interest rates by another 25 basis points in its meeting next week.

They now see the terminal rate peaking at 4.91% in June, even as Fed policymakers have repeatedly backed taking rates above the 5% level. 0#FEDWATCH

Data later in the week is likely to show December personal consumption expenditure index (PCE) fell 0.1% from a 0.1% rise in the prior month. Fourth quarter GDP advance numbers are also awaited.

Dow Jones Industrial Average .DJI constituent, Boeing Co BA.N slipped 1.3% as the planemaker's losses widened in 2022 and it missed fourth-quarter revenue estimates.

At 10:07 a.m. ET, the Dow was down 227.63 points, or 0.67%, at 33,506.33, the S&P 500 .SPX was down 46.92 points, or 1.17%, at 3,970.03, and the Nasdaq Composite .IXIC was down 220.49 points, or 1.95%, at 11,113.79.

Abbott Laboratories ABT.N fell 0.7%, weighed down by lower-than-expected medical device sales in the fourth quarter.

In a bright spot, AT&T Inc T.N rose 6.2% on higher-than-expected quarterly subscriber additions, while Textron Inc TXT.N added 0.3% as revenue beat estimates, boosted by demand for its private jets.

News Corp NWSA.O jumped 8.0%, leading gains on the S&P 500, after Rupert Murdoch withdrew a proposal to reunite News Corp and Fox Corp.

Declining issues outnumbered advancers for a 3.92-to-1 ratio on the NYSE and for a 2.82-to-1 ratio on the Nasdaq.

The S&P index recorded two new 52-week highs and one new low, while the Nasdaq recorded 29 new highs and 16 new lows.

Reporting by Shreyashi Sanyal and Johann M Cherian in Bengaluru; Additional reporting by Ankika Biswas; Editing by Vinay Dwivedi and Anil D'Silva


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