Big Tech’s earnings are surprising investors.
The market may have been hoping for another treat after late Wednesday’s results for Microsoft and Meta, and especially after Alphabet’s impressive results earlier in the week. But it turned out to be more of a trick, as rising AI costs sent chills on Wall Street and left the pair disappointed.
The tech-heavy Nasdaq Composite Index ended a four-day winning streak and retreated from Wednesday’s all-time high as bond yields rose on strong economic data. However, Nasdaq 100 futures fell 1.1% before closing, so it could be a tougher day ahead.
S&P 500 futures fell 0.8% ahead of the move, and Dow Jones Industrial Average futures fell 0.5%.
Pepperstone strategist Michael Brown said early Thursday: “Sentiment is even more uncertain this morning as we continue to see the fallout from fairly disappointing earnings for Microsoft and Meta, and understandably weaker futures led by the Nasdaq 100. It’s stable,” he said.
Earnings will continue to be in the spotlight, especially when Apple and Amazon release their results after the close.
Economic data will also be important this Halloween trading day, as investors will get a key inflation update in the form of the Personal Consumption Expenditure Index. The PCE report is the Fed’s preferred measure of inflation, and economists expect it to show a modest increase.
The consensus is for a 0.2% rate hike in September, an increase of 2.1% from a year ago and still above the Fed’s 2% target.
This is the last inflation report before the FOMC’s November meeting next week, with traders expecting a quarter-point decline at 96%, according to CME’s FedWatch tool.
What will happen in the coming months is less clear. Wednesday’s numbers point to the resilience of the U.S. economy, raising concerns that the Fed won’t cut rates as aggressively or quickly as expected. Private payrolls rose by 233,000 in October, more than double expectations, and U.S. GDP grew by 2.8% in the third quarter, lower than the expected 3.1% increase but still showing strong growth.
