The stock market is expected to fall further. Blame Microsoft’s earnings.

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Shares look set to fall on Wednesday after Microsoft’s earnings failed to impress. Spencer Platt/Getty Images

If anything were to stop the stock market’s decline ahead of the Federal Reserve’s announcement on Wednesday, it would be Microsoft earnings. Unfortunately, Microsoft couldn’t break the high mark set for it, and the major indexes are expected to fall further tomorrow unless investors change their minds.

Microsoft’s earnings weren’t bad. It reported earnings of $2.48 per share, beating forecasts of $2.31, on sales of $51.7 billion, beating estimates of $50.9. Azure’s revenue growth rose 46%, according to Wedbush analyst Dan Ives, beating Street’s expectations for 45% growth but sadly falling short of “some bullish numbers at 48%.” And with that, Microsoft stock (ticker: MSFT) fell 5.2% as of 5:18 p.m. in after-hours trading.

This isn’t just a problem for Microsoft stock owners. It is also the second largest publicly traded company in the United States, which means it is the second largest holding in the S&P 500 and the Nasdaq-100. And that means those indices are already down, even though the market isn’t even open right now. The SPDR S&P 500 ETF (SPY), which tracks the S&P 500 and holds a 6% position in Microsoft, fell 1% in after-hours trading, while the Invesco QQQ (QQQ), which tracks the Nasdaq-100 and has a 9.9% stake in Microsoft, fell 1.6%.

This may change by morning. Investors might change their minds, and Microsoft’s earnings, which looked quite good, might turn out to be enough. Ives is optimistic. “We would be buyers of this modest selloff as we believe the underlying metrics and implied growth trajectory for the remainder of 2022 are strong for MSFT,” he wrote.

But for the rest of us, Microsoft’s earnings don’t seem to have been good enough to halt the market’s decline. it’s a job for the Fed now.

Or not.

Write to Ben Levisohn at [email protected]

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