Markets Brief: What’s Clipping Microsoft Stock, Pharma Earnings and Jobs Report on Deck

Note: After publication, the January jobs report was delayed due to the government shutdown.

The uncertainty may have been resolved around who will be the next Federal Reserve chair, but there is plenty ahead this week for investors to chew on. Much of the focus will stay on earnings. Last week, Microsoft MSFT, Meta META, Apple AAPL, and Tesla TSLA posted results, and while Morningstar analysts found plenty to cheer in each of those reports, the markets were not very impressed.

Many of the questions swirling in the stock market revolve around the profitability of mega-sized AI investments announced with great fanfare last year. Case in point, late Friday The Wall Street Journal reported that Nvidia’s NVDA $100 billion deal with OpenAI may not happen.

What’s Clipping Microsoft’s Stock?

Investors certainly have been skeptical about Microsoft stock, which lost more than 10% since reporting earnings after the close of trading on Wednesday and is down more than 18% over the last three months. As with other big AI players of late, the general concern around Microsoft appears to be whether the mammoth investments being made in artificial intelligence are going to generate sufficient returns.

Morningstar senior analyst Dan Romanoff believes these concerns are overblown for Microsoft. He likens these fears to a game of whack-a-mole. Some sample worries:

• AI itself will replace software.
• Vibe coding using AI will replace software.
• AI won’t end software, but it will pressure seats because of efficiency gains from AI usage.
• Microsoft isn’t investing enough in AI.
• Microsoft is investing too much in AI and won’t earn a return.
• They aren’t monetizing AI features in their software fast enough.

He adds that investors also appeared concerned about the viability of Microsoft’s partnership with OpenAI. “We have no reason for immediate concern, but we are definitely monitoring the $250 billion OpenAI commitment through 2032 as somewhat risky,” he says. But even if OpenAI were to go completely bust (which he believes has nearly no chance of happening), Microsoft has a “huge roster of clients” to fall back on.

More Big Tech Earnings Ahead

Wednesday will bring Alphabet’s GOOGL fourth-quarter results. Morningstar analyst Malik Ahmed Khan says he will be closely watching Google Cloud results, the scale of a likely capex increase for 2026, and continued strength in advertising. “At the same time, we’ll be on the lookout for commentary on potential competition with OpenAI, ads in AI mode, and general monetization of GenAI search,” he says. You can find more of Khan’s take on Alphabet stock here.

Then on Thursday, Amazon AMZN will post its results. Romanoff says he’ll be paying close attention to margin improvements based on efficiency gains, as well as any other guidance for AI and capital expenditures. With the focus in the market on software’s outlook, he thinks AWS performance will also be key:

Going Into Earnings, Is Amazon Stock a Buy, a Sell, or Fairly Valued?

Pharma Earnings on the Docket

Of course, there is more to the market than Big Tech, and this week will bring earnings from most of the major pharmaceutical names. Due out in coming days is Merck MRK, Pfizer PFE, Amgen AMGN, Novo Nordisk NVO, AbbVie ABBV, Eli Lilly LLY and Bristol-Myers Squibb BMY.

Here’s what Karen Andersen, who heads the healthcare equity team at Morningstar, will be keeping an eye on:

With JNJ and Roche having reported, I’m curious about how the rest of the names will be talking about the impact of the Trump agreements on prices. JNJ said the effect was significant, but it absorbed it and still gave strong 2026 guidance. I’m expecting most other firms to have a similar ability to manage through the Medicaid pricing impact.

“The other big area is obesity, of course–the launch of the Wegovy pill appears to be going really well in the first weeks, but Lilly is likely to get approval and launch in the second quarter. So watching these two firms compete with new orals–particularly in the direct to patient (cash pay) channel–will be particularly important. Are they bringing new patients to expand the market? We expect they will. Are they forced to concede more on private insurance prices in obesity? I’m guessing they will be, given the transparency around cash pay and new government obesity drug pricing

“With Johnson & Johnson and Roche having reported, I’m curious about how the rest of the names will be talking about the impact of the Trump agreements on prices. JNJ said the effect was significant, but it absorbed it and still gave strong 2026 guidance. I’m expecting most other firms to have a similar ability to manage through the Medicaid pricing impact.

“The other big area is obesity, of course–the launch of the Wegovy pill appears to be going really well in the first weeks, but Lilly is likely to get approval and launch in the second quarter. So watching these two firms compete with new orals–particularly in the direct to patient (cash pay) channel–will be particularly important. Are they bringing new patients to expand the market? We expect they will. Are they forced to concede more on private insurance prices in obesity? I’m guessing they will be, given the transparency around cash pay and new government obesity drug pricing.”

More Jobs Weakness

The other big item on the calendar this week is the Friday morning release of the January jobs report. Economists are expecting another soft reading for job creation. The FactSet consensus calls for nonfarm payrolls to have risen by 80,000 last month. That may be an improvement from 50,000 in December, but in the scheme of things, that’s sluggish. Still, Fed Chair Jerome Powell doesn’t seem overly concerned about the trajectory of the labor market, and an as-expected reading is seen as unlikely to push the Fed off the pause button for interest rates.

Here’s what the recent payrolls data looked like as of the December report. The trend couldn’t be clearer: