Investors sold off stocks Wednesday morning after Microsoft issued a lackluster earnings report and disappointing revenue forecast for the current quarter. After announcing plans to lay off 10,000 employees, Microsoft reported that its total revenue increased by 2% year over year in the quarter ending December 31, the slowest rate since 2016. Meanwhile, net income fell to $16.43 billion from $18.77 billion in the year-ago quarter.
Microsoft also called for $50.5 billion to $51.5 billion in fiscal third-quarter revenue, well below the $52.43 billion analysts polled by Refinitiv had expected.
During its earnings call on Tuesday, Microsoft CFO Amy Hood said that the company is “seeing customers exercise caution in this environment, and we saw results weaken through December,” adding: “performance in the U.S. was weaker than expected.”
On Wednesday morning, the Dow Jones Industrial Average dropped 400 points, or 1.2%, while the S&P 500 declined 1.45% and the Nasdaq Composite fell 2%.
“If the company is bearish on its own future, why should investors be bullish,” Adam Sarhan CEO of 50 Park Investments, told CNBC. “That’s pretty much the message we’re getting from earnings season so far.”
Microsoft’s lackluster earnings report exacerbated worries that a recession is on the horizon. It also shows how one company can still cause markets to shake. That’s where active management can help.
While passive strategies lack the flexibility to adapt to changing market environments, active ETFs can offer the potential to outperform benchmarks and indexes. Plus, active managers with greater resources and greater scope benefit from economies of scale, which can often translate to better returns.
“Active managers have the flexibility to take advantage of market volatility and add to favored positions when prices become more attractive,” said Todd Rosenbluth, head of research at VettaFi.
As part of its lineup of active exchange traded funds, T. Rowe Price offers a suite of actively managed equity ETFs, including the T. Rowe Price Blue Chip Growth ETF (TCHP), the T. Rowe Price Dividend Growth ETF (TDVG), the T. Rowe Price Equity Income ETF (TEQI), the T. Rowe Price Growth Stock ETF (TGRW), and the T. Rowe Price U.S. Equity Research ETF (TSPA).
T. Rowe Price has been in the investing business for over 80 years through conducting field research firsthand with companies, utilizing risk management, and employing a bevy of experienced portfolio managers carrying an average of 22 years of experience.
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