"MSFT = Most Shorts Frustrated Today": JPM Trading Desk Explains Today's Striking Market Reversal

What a difference 9 short hours makes.

Early this morning, Goldman's biggest trading desk bear, Matt Fleury (whose recent calls for sharp drops in the market have not exactly been accurate) took delight in the thunderous overnight drop in Microsoft - which first jumped on solid cloud earnings but then tumbled on poor guidance and dragged down US equity futures and global stocks - and wrote a report comparing the MSFT report to the legendary Rocky 4 fight scene between The Italian Stallion and Ivan Drago. This is how he described it (the full note is available here):

In Rocky IV, towards the end of the second round as Rocky was taking a seemingly unsustainable thrashing in the corner and threw out a right hook in desperation cutting a previously apparent unbeatable Ivan Drago.

That seems analogous to the MSFT guide down overnight. This was one for the broader market bears as they landed a rare but perhaps narrative shifting blow in the gutter war that has been 2023 markets.

I look at the tech layoffs and think it’s the mark of a business environment that is slowing. In time when things start to turn, companies will be leaner and more ‘right sized’ and that will add the operating leverage that will fuel the next bull market. It seems thus far the market has been happy to skip the business is slowing stage and jump straight to rewarding for job cuts & look for the bull market.

I think MSFT’s guidance last night will at least give the broader equity bears enough encouragement to come out for another round.