US STOCKS-Nasdaq futures drop 1% after Microsoft's bleak outlook

Nasdaq futures fell more than 1% on Wednesday as Microsoft led declines in tech stocks after it forecast current-quarter cloud revenue below Wall Street estimates.

Microsoft Corp shares fell 2.1% in premarket trading after it warned that growth in its cloud business, which helped the company meet analysts' expectations in the second quarter, could stall, while its PC unit continues to struggle. Other large growth stocks including Amazon.com Inc, Tesla Inc, Apple Inc and Alphabet Inc also dropped between 1% and 2%.

Growth stocks 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 such stocks will be sustained. "Microsoft is dealing with a marked slowdown in personal computing revenues, which reflects the incredibly challenging consumer environment," Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown wrote in a client note.

"Despite renewed hope that interest rate hikes might be slowed and peak inflation coming into view, buying a new laptop and the software that comes with it is simply not a priority for many people right now." Microsoft was also hit with a networking outage that disrupted its cloud platform, Azure, along with services such as Teams and Outlook, potentially affecting millions of users globally.

At 5:30 a.m. ET, Dow e-minis were down 215 points, or 0.64%, S&P 500 e-minis were down 31.75 points, or 0.79%, and Nasdaq 100 e-minis were down 140.25 points, or 1.18%.

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