US technology shares fell in premarket trading Wednesday, weighed down by a slew of disappointing earnings in the sector and the likelihood of more interest rate increases from the Federal Reserve.
(Bloomberg) — US technology shares fell in premarket trading Wednesday, weighed down by a slew of disappointing earnings in the sector and the likelihood of more interest rate increases from the Federal Reserve.
Contracts on the tech-heavy Nasdaq 100 index slipped 0.4%, dragged down by weakness in some top constituents, including Microsoft Corp., which posted tepid sales growth and forecast a slowdown in its cloud-computing business. Chipmakers mostly lost ground, after a lukewarm earnings forecast from Texas Instruments Inc., the biggest maker of analog semiconductors, while Amazon.com Inc. fell as much as 2.5% after a news report about a looming antitrust lawsuit.
On the plus side, Google’s parent Alphabet Inc. jumped about 7% after posting forecast-beating revenue. Meta Platforms Inc. rose ahead of its own report later Wednesday.
European losses were greater, with the Stoxx Europe 600 Index down almost 1%. The region’s biggest company, LVMH, slumped as much as 5.4% on signs of a slowdown in spending by US wealthy consumers. Unilever Plc and British American Tobacco Plc also have highlighted recent softness in US markets.
“We are going to see some deceleration in corporate earnings, deceleration in economic growth, softening of demand; all of this will have a higher impact on equities,” Aarthi Chandrasekaran, director of investments at Shuaa Asset Management, said on Bloomberg TV. Still, “the US economy is weakening but it’s not weakening enough to price in a full rate cut next year,” she said.
Despite the disappointments, roughly 80% of US companies have thus far beaten profit estimates, and half of European names have done so, according to data compiled by Bloomberg. This is partly down to a steady whittling down of expectations before the season kicked off.
Fahad Kamal, chief investment officer at SG Kleinwort Hambros Bank Ltd., noted that Wednesday’s market pullback comes after a broad stretch of gains, with the S&P 500 less than 5% off record highs.
“The bigger picture is that this quarter is probably the low point for earnings; this year will end up positive both in Europe and US,” he said, while cautioning of risks from “the effect of central bank policy tightening.”
Later on Wednesday, the Fed is expected to raise rates by 25 basis points, and swap contracts are factoring some additional rate increases by year-end as well, while the European Central Bank should deliver a quarter-point increase on Thursday. With those hikes baked in, investors will focus on signals of how much more policy tightening might be warranted.
Recent data points have pointed to a soft landing for the US, while relatively resilient growth globally has prompted the International Monetary Fund to raise its outlook for the world economy. It now expects global gross domestic product to expand 3% in 2023, and while that’s slower than last year’s 3.5%, it’s faster than April’s 2.8% projection.
On currency markets, a gauge of the dollar edged lower, while the yen strengthened for a third day on speculation the Bank of Japan could signal a shift away from ultra-loose policies at its Friday meeting. US Treasury 10-year yields were steady while oil prices retreated after a four-day rally.
Key events this week:
- US new home sales, Wednesday
- FOMC rate decision, Fed Chair Powell news conference, Wednesday
- China industrial profits, Thursday
- ECB rate decision, Thursday
- US GDP, durable goods orders, initial jobless claims, wholesale inventories, Thursday
- Japan Tokyo CPI, Friday
- BOJ rate decision, Friday
- Eurozone economic confidence, consumer confidence, Friday
- US consumer income, employment cost index, University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
- The Stoxx Europe 600 fell 0.9% as of 1:22 p.m. London time
- S&P 500 futures fell 0.2%
- Nasdaq 100 futures fell 0.3%
- Futures on the Dow Jones Industrial Average fell 0.2%
- The MSCI Asia Pacific Index was little changed
- The MSCI Emerging Markets Index fell 0.2%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.1058
- The Japanese yen rose 0.3% to 140.43 per dollar
- The offshore yuan fell 0.3% to 7.1561 per dollar
- The British pound was little changed at $1.2907
Cryptocurrencies
- Bitcoin fell 0.1% to $29,199.86
- Ether fell 0.5% to $1,853.51
Bonds
- The yield on 10-year Treasuries advanced one basis point to 3.89%
- Germany’s 10-year yield advanced three basis points to 2.46%
- Britain’s 10-year yield advanced one basis point to 4.28%
Commodities
- Brent crude fell 0.9% to $82.91 a barrel
- Spot gold rose 0.4% to $1,971.90 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Brett Miller and Allegra Catelli.
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