Technology stocks led declines in US equity futures Thursday after Meta Platforms Inc.’s disappointing outlook underscored the risk of volatility in a high-stakes earnings week.
Nasdaq 100 contracts fell 0.9%, with Meta accounting for more than half of that decline. The Facebook parent tumbled as much as 15% in premarket trading after it projected second-quarter sales below analyst expectations and increased spending estimates for the year. Alphabet Inc., which reports earnings later along with Microsoft Corp., also dropped. S&P 500 futures slid 0.6%.
Europe’s Stoxx 600 Index was steady as traders processed a deluge of corporate updates on the busiest day of the earnings season. Anglo American Plc soared 14% after rival BHP Group made an all-share takeover proposal valuing it at £31.1 billion ($38.8 billion) in a deal that would create the world’s largest copper miner.
The stakes are high for earnings from the tech behemoths after the frenzy around artificial intelligence powered Wall Street’s record-breaking rally. The market’s reaction is a sign of how expectations of the boost from AI to profits at companies developing the technology may have run ahead of expectations.
“I think we are just hitting a little bit of a reality check,” Sonja Laud, chief investment officer at Legal & General Investment Management, said on Bloomberg Television. “This doesn’t take away the excitement around the potential going forward, but it’s probably valuation coming back to a more realistic pathway.”
Aside from results, traders are keenly awaiting US economic growth figures due later after weeks of scaling back their expectations for Federal Reserve interest-rate cuts. Economists surveyed by Bloomberg predict GDP likely cooled to around 2.5% in the first quarter, with the figures still potentially suggesting persistent inflationary pressures.
“Any downside surprises could see markets bringing expected Fed interest rate cuts earlier — after having been pushed out to much later this year,” economists at Rand Merchant Bank in Johannesburg said. “However, upside surprises could see continued market volatility as the market tries to ascertain the risk that a hotter-than-expected economy poses to anticipated interest-rate cuts.”
The yen extended losses after weakening beyond 155 per dollar for the first time in more than three decades on Wednesday, heightening the chances of intervention ahead of Bank of Japan’s policy decision Friday. The Japanese currency depreciated to as weak as 155.74 per dollar on Thursday, a new 34-year low. The BOJ is forecast to keep its interest rate settings unchanged, while the yen’s plunge makes it more likely the bank will tone down its stance on keeping policy easy.
Governor Kazuo Ueda’s press conference “is expected to take a hawkish tone, and even if depreciation in the yen doesn’t accelerate, the government is likely to intervene at the same time and swing the yen stronger by about 5 yen,” said Eiji Dohke, a strategist at SBI Securities. The first intervention would probably be of trillions of yen followed by smaller long-term purchases, he said.
Treasuries were little changed after yields rose in the previous session. Investors absorbed a $70 billion sale of five-year Treasuries on Wednesday at a slightly higher-than-anticipated yield, following an even-stronger show of demand for the auction of two-year notes on Tuesday. Another $44 billion of issuance is due on Thursday, with the sale of of seven-year notes. A gauge of dollar strength edged lower.
In Asian stocks, a regional gauge dropped by more than 1% as shares in South Korea and Japan tumbled. Stocks outperformed in Hong Kong amid increased purchases by Chinese investors. Mainland traders have snapped up $20 billion of Hong Kong stocks on a net basis since March, putting the market on track for the biggest two-month inflow since 2021, BNP strategists including Jason Lui said in a note.
Meanwhile, Secretary of State Antony Blinken said the world’s largest economies must “lay out our differences,” as he began two days of talks in China, with the threat of US sanctions targeting Beijing over its support of Russia’s war in Ukraine looming over his visit.
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This story was produced with the assistance of Bloomberg Automation.
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