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Hi John, here's what you need to know for October 24th in 3:11 minutes.

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• Microsoft let investors in on a better-than-expected quarterly update
• Global economic bellwethers Caterpillar and Texas Instruments reported weaker-than-expected results

OK Computer

What’s Going On Here?

“Just” $40 billion separates the values of Apple and Microsoft – the world’s largest and second-largest public companies. So here’s hoping Microsoft’s better-than-expected quarterly update on Wednesday will help it become fitter, happier, and more productive…

What Does This Mean?

Microsoft’s revenue and profit was higher than investors had forecast, and the sky was the limit for the company’s cloud computing segment, which continued its breakneck ascent (tweet this). That might in part be thanks to Microsoft’s newly announced agreement with SAP, Europe’s largest tech company: the German giant’s customers will ctrl-shift onto Microsoft’s cloud computing platform, bolting on sales of SAP’s cloud tools to boot. And if Microsoft can beat market-leader Amazon to win a $10 billion US government cloud computing contract, its cloud business may yet go stratospheric.

Why Should I Care?

For markets: Shaping investors’ sentiment.
Many global investors take their buying and selling cues from the US stock market, since it’s the biggest in the world. And with Microsoft representing 4% of the US market, the software behemoth has a major influence over the direction of the country’s stocks overall. Investors initially buying Microsoft’s stock after its update only pushed the trillion-dollar company’s share price slightly higher. That momentum may not be enough to help Microsoft overtake Apple in the stock market charts, but might still help lift stocks elsewhere on Thursday.

Zooming out: Tech saves “tech”.
On Wednesday, recently fallen “tech” angel WeWork struck a deal with its largest investor, SoftBank, giving it an 80% stake in the company in order to avoid running out of money next week. The company was valued at $47 billion shortly before its attempted initial public offering in September, but it’s now worth closer to $8 billion. The company’s founder – who now appears to have few friends among professional investors – is set to step down as CEO, but not without a $1 billion payday that’d make Mr Nawana green with envy.

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The Very Hangry Caterpillar

What’s Going On Here?

On Wednesday, American machinery firm Caterpillar reported a third-quarter profit that left a bad taste in investors’ mouths and a forecast that turned their stomachs.

What Does This Mean?

Caterpillar’s revenue and profit was much lower than investors had predicted – and since the company makes sales all over the world, investors tend to see it as a bellwether for the global economy. So Caterpillar’s sales in the US and Asia – which fell 3% and 13% respectively from the same time last year – suggest customers might have put purchases on hold due to the uncertainty created by the ongoing US-China trade war.

But they say everything’s bigger in Texas, and that was certainly true of chipmaker Texas Instruments’ disappointment late on Tuesday. It reported lower sales than expected and cut its forecast for the year, again blaming a trade war-related slowdown in customer purchases. Texas’ stock then went south 7% on Wednesday.

Why Should I Care?

For markets: Marginal moves hit hard.
Large industrial companies like Caterpillar tend to have high fixed costs they pay no matter what – like rent, energy, and wages. That’s useful when sales are growing, because new revenues only bring small “incremental” costs (i.e. product materials) and, as such, generate high profits. But when sales fall, those hard-to-cut costs eat into revenues, causing an even bigger profit drop. That partly explains why Caterpillar’s quarterly revenue was 6% lower, but its profit fell 8%.

The bigger picture: Brace for a decline.
Aircraft maker Boeing’s third-quarter results on Wednesday also fell short of investors’ expectations. But that was perhaps unsurprising given the company’s own difficulties in predicting its earnings this year. The company did warn that it was reducing the production of some of its planes, likely in response to weaker Chinese demand. That could be a sign of further forthcoming weakness among industrial companies – one that could become a pattern as others report earnings updates.

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