Nasdaq futures fall as AI results fail to match up to hype

US equity futures slumped after earnings from tech giants fell short of Wall Street’s high expectations and as investors prepared for the first interest-rate decision of the year from the Federal Reserve.

Contracts on the Nasdaq 100 slid 1.2%, while those on the S&P 500 retreated 0.5%. Microsoft Corp., Alphabet Inc. and Advanced Micro Devices Inc. dropped in premarket trading after their updates failed to match the recent hype around tech megacaps and artificial intelligence. Paramount Global soared 21% after Bloomberg reported that media mogul Byron Allen made a $14.3 billion offer for the media and entertainment company.

It’s a busy day of earnings in Europe too: Novo Nordisk A/S became only the second European company to reach a market value of $500 billion after it said sales and profit will surge again this year thanks to its blockbuster obesity shot Wegovy. Shares in Hennes & Mauritz AB plunged 10% after the retailer missed profit estimates and its chief executive officer stepped down. Europe’s Stoxx 600 index gained 0.3%. 

Attention turns later to the Fed, with the Federal Open Market Committee poised to keep rates in a range of 5.25% to 5.5%, a 22-year high first reached in July. The rate decision and accompanying statement will be released at 2 p.m. in Washington, with Chair Jerome Powell holding a press conference 30 minutes later.

Traders see a roughly 40% chance the central bank will lower rates for the first time in March, but most Fed officials have said it’s too soon to speculate on such a pivot. While Powell may say that recent declines in inflation are encouraging, he may still show little urgency to ease, given resilience in the labor market and growth in the economy.

“Even if it’s not our scenario, we expect the Fed to keep the door open for a possible rate cut in March, without sending a firm and definitive signal,” said Alexandre Hezez, chief investment officer at Group Richelieu in Paris.

On the monetary policy front in Europe, data out Wednesday showed cooling price pressures in France, adding to optimism that the European Central Bank may begin trimming rates as soon as April. The 10-year yield on German debt dropped as much as eight basis points, while the euro weakened. 

Meanwhile, the dollar strengthened against most of its Group-of-10 peers, while Treasury yields and 10-year yields dropped.

In Asia, Japanese bond yields rose and the yen ticked higher as a summary of the Bank of Japan’s meeting signaled it’s getting closer to raising its interest rate for the first time since 2007. Japanese stocks also rose, as signs that the BOJ may move to end negative rates boosted optimism over lenders’ profitability.

Australian equities closed at a record high after soft inflation data bolstered bets for monetary policy easing. The local dollar and government bond yields fell. 

Stocks in China and Hong Kong extended losses after data showed another month of contraction in China’s factory activity. Mainland shares were close to wiping out all the gains spurred by hopes of stronger support measures by the authorities. A broader gauge of Asian equities edged higher.  

Elsewhere, oil headed for its first monthly gain since September as an escalation of attacks on ships in the Red Sea spurred a diversion of tanker traffic and raised fears about a wider conflict in the Middle East. 

Corporate Highlights

• Media mogul Byron Allen has made a $14.3 billion offer to buy all of the outstanding shares of Paramount Global, according to people familiar with his terms.
• Novo Nordisk said sales and profit will surge again this year as it continues to roll out its blockbuster obesity shot Wegovy around the world.
• Hennes & Mauritz, Europe’s second-largest listed fashion retailer, appointed Daniel Erver chief executive officer to replace Helena Helmersson. The announcement comes as the company reported fourth-quarter profit that fell short of estimates.
• Novartis AG forecast earnings will grow at a high single digit pace this year as the Swiss drugmaker focuses on drugs with bigger growth potential.
• GSK Plc upgraded its long-term outlook, boosted by sales of the pharmaceutical company’s new RSV vaccine and other drug launches.
• Iliad SA said that Vodafone Group Plc rejected a revised offer to combine the two companies’ Italian businesses, ending its bid to consolidate in one of Europe’s most competitive telecom markets.
• Samsung Electronics Co. posted its fourth straight quarter of profit decline in the holiday quarter, after a long-awaited recovery in chip and electronics demand delivered few returns for the world’s biggest memory maker.

 Key events this week: 

• Boeing announces earnings amid US government safety probe, Wednesday
• Federal Reserve interest rate decision and Fed Chair Jerome Powell’s news conference, Wednesday
• US Treasury quarterly refunding, Wednesday
• China Caixin manufacturing PMI, Thursday
• Eurozone S&P Global Manufacturing PMI, CPI, unemployment, Thursday
• US productivity, construction spending, ISM Manufacturing, initial jobless claims, Thursday
• Apple, Amazon, Meta, Deutsche Bank, BNP Paribas earnings, Thursday
• Bank of England interest rate decision, Thursday
• US employment report, University of Michigan consumer sentiment, factory orders, Friday

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 was little changed as of 9:57 a.m. London time
• S&P 500 futures fell 0.5%
• Nasdaq 100 futures fell 1.2%
• Futures on the Dow Jones Industrial Average were little changed
• The MSCI Asia Pacific Index rose 0.1%
• The MSCI Emerging Markets Index fell 0.5%

Currencies

• The Bloomberg Dollar Spot Index rose 0.1%
• The euro fell 0.2% to $1.0823
• The Japanese yen fell 0.1% to 147.80 per dollar
• The offshore yuan was unchanged at 7.1869 per dollar
• The British pound fell 0.2% to $1.2670

Cryptocurrencies

• Bitcoin fell 2% to $42,698.11
• Ether fell 2.7% to $2,315.7

Bonds

• The yield on 10-year Treasuries declined one basis point to 4.02%
• Germany’s 10-year yield declined five basis points to 2.22%
• Britain’s 10-year yield declined three basis points to 3.87%

Commodities

• Brent crude fell 0.9% to $82.12 a barrel
• Spot gold was little changed

This story was produced with the assistance of Bloomberg Automation.