What happened
Shares of Microsoft (MSFT 1.92%) were trading higher Tuesday in the wake of a cooler-than-expected November inflation report from the Bureau of Labor Statistics that lifted the market broadly, but which especially helped the tech sector.
As of 10:36 a.m. ET, the stock was up 3%, while the Nasdaq was up 2.1%.
NASDAQ: MSFT
Key Data Points
So what
The specter of the Federal Reserve has been hovering over the stock market all year as its rapid boosts to the federal funds rate have inspired investors to bail out of growth stocks and tech stocks and move their money to safer stock market sectors as well as bonds.
Tuesday's news that the Consumer Price Index's year-over-year growth rate slowed to 7.1% in November -- its slowest year-over-year growth since last December -- sent cheers through the market, as it not only means that inflationary headwinds are easing, it also makes it less likely that the Federal Reserve will continue to aggressively raise interest rates.
Microsoft hasn't been hit as hard by macroeconomic factors as some of its peers, but it's still sensitive to the overall business cycle in that it depends on business investment in areas like software and cloud infrastructure, as well as consumer spending on things like computers and video games.
In its most recent fiscal quarter, Microsoft noted that it was feeling the challenges of the macroeconomic environment even as it continued to deliver strong growth in its software and cloud segments. Sales in its personal computing segment declined as it faced difficult comparisons with the quarter a year ago, when it was still benefiting from pandemic-related tailwinds.
Now what
There's no question that Microsoft can withstand a recession. The company is one of the most profitable enterprises in the world, and also one of only two U.S. stocks to enjoy a AAA credit rating from the S&P.
However, its shares have fallen alongside the Nasdaq this year in response to rising interest rates. Given the company's enduring strengths and high-margin businesses, investors may want to take advantage of a continued sell-off in the stock.
