Tech stocks dragged US stock futures lower on Thursday after a slightly worse-than-expected outlook from Meta Platforms and a miss on first-quarter expectations at IBM led to sharp losses for both stocks and put pressure on other tech giants in the hottest part of earnings season.
Nasdaq 100 contracts fell 1%, with Meta accounting for half of that decline. Meta plunged 14% in after-hours trading after its second-quarter revenue forecast fell short of analysts' expectations and the company raised spending estimates for the year to expand its infrastructure. IBM also fell after the results. Alphabet, which releases its results later along with Microsoft, also fell. S&P 500 futures fell by 0.5%. Stocks outside the US, e.g. in Europe, also came under pressure from selling in the US tech sector, although European companies posted solid gains overall.
After the hype around artificial intelligence fueled the record rally on Wall Street, hopes for very strong growth in tech mega-caps appear to be extreme. Gains earlier in the week are waning, suggesting that investors are now more cautious ahead of the next earnings reports from mega-caps, which should show strong AI-driven revenue growth. In addition, key US economic data (US GDP) will be released, which will also bring into focus the timing of the Federal Reserve's monetary easing.
The sharp fall in Meta's share price after already optimistic expectations for the first quarter were exceeded shows that the hopes of tech mega-caps for a further acceleration in growth thanks to AI may have gone too far – at least in the short term.
Investors are waiting for the figures on US economic growth after expectations for interest rate cuts by the Fed have been scaled back for weeks. Analysts expect US GDP to have cooled to around 2.5% in the first quarter – still strong growth, but one that could further ease concerns that further rapid expansion could accelerate inflation in the US again. Big surprises are unlikely, but slightly weaker US growth would be a positive, while strong growth would weigh on Wall Street in the short term as investors would then scale back rate cut expectations again.
The yen extended its losses after falling above 155 per dollar for the first time in more than three decades on Wednesday. I expect a hawkish tone in the Bank of Japan's monetary policy decision tomorrow. However, this will likely only temporarily support the Japanese currency unless the Bank of Japan announces further rate hikes or other ways to reduce loose monetary policy in a credible manner.
We see gold higher as investors are more nervous again. I expect gold to rise above $2,330 today. US GDP data will play an important role. If the data is strong, gold will face a short-term headwind. Oil prices also continued to rise.
👁 ROB'S MARKET OVERVIEW:
April 25, 2024
🌐/🇺🇸 Global Markets ↕️/↘️
Cyclical / Luxury Stocks ↕️/↗️
Tech/Growth Stocks ↕️/↘️
Financial Stocks ↘️/➡️
Defensive Stocks ➡️/↗️
Energy Stocks ➡️/↗️ (remains slightly bullish)
Materials Stocks ↘️/➡️
💱 Forex
AUD ↗️/➡️ (further gains on higher commodity prices; likely with some headwinds as risk sentiment worsens temporarily)
CAD, GBP, EUR ↗️/➡️ (depending on US GDP data and USD movements)
CHF ➡️
USD ➡️/↘️(USD with some headwinds with early signs of cooling US economy)
JPY ↘️/➡️ (saw further losses but will stabilize ahead of BoJ meeting)
⚒ Commodity Markets ↗️
Oil prices ↗️/➡️
Natural Gas prices ↕️
Metal prices ↗️/➡️
Gold ↗️/↕️ (benefiting from more cautious mood; will short-term react strongly on US GDP data)
⚡️Cryptos ↘️/↕️ (remains in volatile sideways movement after recent selling post Bitcoin halving; Range $63K – $67K)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)
Your Robert
