Big Tech earnings are spooking investors.
The market may have expected another treat following Microsoft and Meta’s earnings late Wednesday, particularly after Alphabet’s impressive results earlier in the week. But it was more of a trick instead, as the pair disappointed—with rising AI expenses sending chills down Wall Street.
The tech-heavy Nasdaq Composite snapped its four-day winning streak and fell back from its record high Wednesday as bond yields rose after economic data proved strong. But it could be an even tougher day ahead, as Nasdaq 100 futures dropped 0.8% ahead of the open.
S&P 500 futures pointed 0.7% lower ahead of the open, while Dow Jones Industrial Average futures fell 0.5%.
“Sentiment is shakier this morning as fallout from rather disappointing Microsoft and Meta earnings continues, with weakness in futures unsurprisingly led by the Nasdaq 100,” Pepperstone strategist Michael Brown said early Thursday.
Earnings will continue to be in focus, particularly when Apple and Amazon report results after the bell.
Economic data will also be important on this Halloween day of trading as investors will get a key inflation update in the form of the personal consumption expenditures index. The PCE report is the Federal Reserve’s preferred inflation metric, and economists expect it to show a slight uptick.
The consensus calls for a 0.2% increase in September, which would be up 2.1% from a year earlier and still above the Fed’s 2% target.
It’s the final inflation report before the Fed’s November meeting next week, at which traders see a 96% of a quarter-point cut, according to CME’s FedWatch tool.
What happens in the months ahead, is less clear. Data Wednesday pointed to the resilience of the U.S. economy, raising concerns that the Fed may not cut rates as aggressively, or as quickly, as expected. Private payrolls increased by 233,000 jobs in October, more than double expectations, while U.S. GDP rose 2.8% in the third quarter, below estimates of 3.1% but still showing robust growth nonetheless.