Microsoft defended AI spending despite DeepSeek pressure
The earnings docket is in focus amid a slew of megacap reports, with a handful of Dow components stepping into the confessional as well. Caterpillar Inc (NYSE:CAT) and Microsoft Corp (NASDAQ:MSFT) are among them, and as both securities tumble after reporting results, now looks like a good time to check in.
Microsoft Stock's Worst Day Since October
MSFT is down 6% to trade at $416.03 at last glance, pacing for its fourth daily loss in five and worst day since October, but a floor at $410 looks ready to contain this pullback. The tech giant beat top- and bottom-line estimates during its fiscal second quarter, but it also issued a dismal cloud growth outlook and defended increased spending on artificial intelligence (AI) despite DeepSeek pressure.
The equity attracted six price-target cuts in response, the worst from BMO to $500 from $510. The biggest loser on the Dow today, MSFT is also the second most-traded stock in the options pits with triple the intraday average volume. Most popular by far is the weekly 1/31 420-strike call, where positions are being opened.
Caterpillar's Lackluster Sales Forecast
CAT is also struggling, last seen down 4.3% at $376.12, brushing off a fourth-quarter profit beat after the heavy equipment name also reported a revenue miss and cut its 2025 sales forecast. Caterpillar stock failed to conquer the $410 region in the previous session, which also enacted pressure in November. Despite eyeing its worst single-day percentage drop since September, CAT still sports a 25.5% year-over-year lead.
Over at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), CAT's 50-day call/put volume ratio of 1.54 sits higher than all other annual readings. This indicates options traders have favored calls over the last 10 weeks.