US equity futures slumped on Wednesday, as recent earnings reports from the likes of Microsoft Corp. fanned concerns about the health of corporate America and investors grew wary that Berlin’s decision to approve the re-export of German-made tanks would provoke an escalation in the Ukraine war.
(Bloomberg) — US equity futures slumped on Wednesday, as recent earnings reports from the likes of Microsoft Corp. fanned concerns about the health of corporate America and investors grew wary that Berlin’s decision to approve the re-export of German-made tanks would provoke an escalation in the Ukraine war.
Futures indicated Wall Street was in for a drubbing, with contracts for the Nasdaq 100 down more than 1% and those on the S&P 500 only marginally better. A two-day Nasdaq rally ground to a halt Tuesday after Microsoft warned of decelerating revenue growth in its cloud-computing business and other key names such as 3M Co. and chipmaker Texas Instruments Inc. also disappointed investors. Shares in Microsoft and other tech firms such as Salesforce Inc., Tesla Inc. and Amazon.com fell between 1% and 2% in New York premarket trading.
A flight to havens lifted bonds, especially in Europe where yields on 10-year German debt slipped five basis points. The dollar steadied as the global mood soured following Germany’s pledge to supply Ukraine with more than 100 Leopard 2 battle tanks.
Investors now await updates from the likes of Tesla Inc. and IBM Corp. A dour corporate outlook, a looming US recession and fears of escalation in the Ukraine-Russia war are all contributing to an equity pullback, according to Kenneth Broux, a strategist at Societe Generale.
“The market is definitely worried about slowing earnings growth, especially on tech, so there has been a sense the market wants to keep selling tech and the dollar,” Broux said. “But a huge tail risk now is what happens in Ukraine, if there is an escalation in the conflict and Europe gets drawn into the conflict.”
Europe’s Stoxx 600 equity index also dropped, as software firms such as SAP SE and Sage Group Plc felt the heat from Microsoft while Dutch chip-tool maker ASML Holding NV falling after posting a profit miss.
The concern is that “investors do not sufficiently reflect this challenging earnings outlook in their investment decisions,” warned Michael Strobaek, chief investment officer at Credit Suisse, in a report. He said he expected pressure on earnings to increase.
Elsewhere, oil prices ticked higher. Gold inched lower after recent gains that pushed the precious metal to the highest level since April. Bitcoin pared a decline that would mark its first two-day drop this year.
Key events this week:
- Earnings for the week include: Abbott Laboratories, ASML Holding, AT&T, Boeing, International Business Machines, NextEra Energy, Tesla (Wednesday); American Airlines, Blackstone, Comcast, Diageo, Intel, LVMH Moet Hennessy Louis Vuitton, Mastercard, SAP, Southwest Airlines, Visa (Thursday); American Express, Charter Communications, Chevron, HCA Healthcare (Friday)
- US MBA mortgage applications, Philadelphia Fed non-manufacturing activity, Wednesday
- US fourth-quarter GDP, new home sales, initial jobless claims, Thursday
- US personal income/spending, PCE deflator, University of Michigan consumer sentiment, pending home sales, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.8% as of 8:21 a.m. New York time
- Nasdaq 100 futures fell 1.3%
- Futures on the Dow Jones Industrial Average fell 0.6%
- The Stoxx Europe 600 fell 0.6%
- The MSCI World index was little changed
Currencies
- The Bloomberg Dollar Spot Index fell 0.1%
- The euro was little changed at $1.0885
- The British pound was little changed at $1.2333
- The Japanese yen rose 0.3% to 129.75 per dollar
Cryptocurrencies
- Bitcoin fell 0.9% to $22,702.44
- Ether fell 2.3% to $1,562.14
Bonds
- The yield on 10-year Treasuries declined two basis points to 3.43%
- Germany’s 10-year yield declined five basis points to 2.10%
- Britain’s 10-year yield declined seven basis points to 3.20%
Commodities
- West Texas Intermediate crude rose 0.3% to $80.37 a barrel
- Gold futures fell 0.4% to $1,943.70 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Richard Henderson, Katie Greifeld and Vildana Hajric.
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