Negative Reaction To Microsoft, Meta Results May Weigh On Wall Street

The major U.S. index futures are currently pointing to a lower open on Thursday, with stocks likely to see further downside after coming under pressure late in the previous session.

A negative reaction to earnings news from tech giants Microsoft (MSFT) and Meta Platforms (META) is likely to weigh on Wall Street early in the session.

Shares of Microsoft are tumbling by 3.6 percent in pre-market trading after the company reported better than expected fiscal first quarter results but provided disappointing revenue guidance for the current quarter.

Facebook parent Meta is also seeing notable pre-market weakness after reporting third quarter earnings that beat estimates but weaker than expected user growth. Meta also forecast an increase in capital spending due to AI investments.

The futures remained firmly negative after the Commerce Department released a report on personal income and spending that includes the Federal Reserve’s preferred inflation readings.

The report said the personal consumption expenditures (PCE) price index rose by 0.2 percent in September after inching up by 0.1 percent in August. The modest increase matched economist estimates.

The annual rate of growth by the PCE price index slowed to 2.1 percent in September from 2.3 percent in August, which was also in line with expectations.

The Commerce Department also said the core PCE price index, which excludes food and energy prices, climbed by 0.3 percent in September after rising by 0.2 percent in August. The increase was also in line with estimates.

Meanwhile, the annual rate of growth by the core PCE price index in September was unchanged from the previous month at 2.7 percent, while economists had expected the pace of growth to slow to 2.6 percent.

With the more closely watched monthly jobs report looming, the Labor Department also released a report showing an unexpected decline by first-time claims for U.S. unemployment benefits in the week ended October 26th.

Stocks showed a lack of direction throughout much of the session on Wednesday but came under pressure in the latter part of the trading day. The major averages spent most of the day bouncing back and forth across the unchanged line before sliding more firmly into negative territory.

After reaching a new record intraday high in early trading, the tech-heavy Nasdaq fell 104.82 points or 0.6 percent to 18,607.93. The S&P 500 also dipped 19.25 points or 0.3 percent to 5,813.67, while the Dow slipped 91.51 points or 0.2 percent to 42,151.54.

The choppy trading seen for most of the trading day came as investors reacted to a mixed batch of corporate earnings and U.S. economic news.

Shares of Alphabet (GOOGL) jumped by 2.8 percent after the Google parent reported third quarter results that beat analyst estimates on both the top and bottom lines.

Snapchat parent Snap (SNAP) also soared by 15.9 percent after reporting better than expected third quarter results and announcing a $500 million stock repurchase program.

Meanwhile, shares of Advanced Micro Devices (AMD) plunged by 10.6 percent after the chipmaker reported third quarter revenues that beat expectations but provided disappointing fourth quarter revenue guidance.

Dow component Caterpillar (CAT) also slumped by 2.1 percent after the construction equipment maker reported weaker than expected third quarter earnings.

On the U.S. economic front, payroll processor ADP released a report showing private sector employment in the U.S. shot up by much more than anticipated in the month of October.

ADP said private sector employment surged by 233,000 jobs in October after jumping by an upwardly revised 159,000 jobs in September.

Economists had expected private sector employment to climb by 115,000 jobs compared to the addition of 143,000 jobs originally reported for the previous month.

However, a separate report released by the Commerce Department showed U.S. economic growth unexpectedly slowed in the third quarter.

The Commerce Department said gross domestic product shot up by 2.8 percent in the third quarter after surging by 3.0 percent in the second quarter. Economists had expected another 3.0 percent jump.

The unexpected slowdown in the pace of GDP growth primarily reflected a downturn in private inventory investment and a larger decrease in residential fixed investment.

Semiconductor stocks pulled back sharply after rallying on Tuesday, dragging the Philadelphia Semiconductor Index down by 3.4 percent.

The steep drop by AMD weighed on the sector along with a nosedive by shares of Qorvo (QRVO), which plummeted by 27.3 percent after the company provided disappointing fiscal third quarter earnings guidance.

Substantial weakness was also visible among computer hardware stocks, as reflected by the 2.6 percent slump by the NYSE Arca Computer Hardware Index.

Shares of Super Micro Computer (SMCI) plunged by 32.7 percent after the tech company revealed Ernst & Young has resigned as its auditor.

Telecom, gold and steel stocks also moved notably lower on the day, while some strength remained visible among housing stocks.

Commodity, Currency Markets

Crude oil futures are rising $0.59 to $69.20 a barrel after jumping $1.40 to $68.61 a barrel on Wednesday. Meanwhile, after climbing $19.70 to $2,800.80 an ounce in the previous session, gold futures are falling $14.20 to $2,786.60 an ounce.

On the currency front, the U.S. dollar is trading at 152.63 yen versus the 153.42 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.0884 compared to yesterday’s $1.0856.

Asia

Asian stocks ended broadly lower on Thursday, as investors reacted to mixed earnings from U.S. technology companies and signals from the Bank of Japan that further rate increases are still on the horizon.

Chinese markets bucked the weak regional trend ahead of a highly anticipated top legislative bond meeting scheduled in Beijing on November 4-8, with investors awaiting details of stimulus measures.

The yen recovered from a nearly three-month low against the dollar as the Bank of Japan kept rates steady and warned of “high uncertainties” following the ruling party’s worst election result in 15 years.

Gold prices climbed to a record high before retreating as investors awaited U.S. non-farm payrolls figures, inflation data and next week’s presidential election for insight into Federal Reserve policy.

Oil extended gains from the previous session on optimism over U.S. fuel demand following an unexpected drop in crude inventories.

China’s Shanghai Composite Index rose 0.4 percent to 3,279.82 as official data showed China’s manufacturing sector returned to expansion in October after five consecutive months of contraction.

A survey on services also showed some pick-up in activity. Hong Kong’s Hang Seng Index ended 0.3 percent lower at 20,317.33 after a choppy session.

Japanese markets closed lower due to political uncertainty and concerns about abrupt policy shifts. In addition, reports on retail sales and industrial production released today offered mixed signals about the economy.

The Nikkei 225 Indedx dropped half a percent to 39,081.25, while the broader Topix Index settled 0.3 percent lower at 2,695.51.

Seoul stocks fell sharply after Facebook owner Meta Platforms and Microsoft both warned of accelerating costs for artificial intelligence. The Kospi ended down 1.5 percent at 2,556.15, dragged down by financials and technology stocks.

Data showed earlier in the day that South Korean industrial output fell from a month earlier in September on dwindling production in the semiconductor and other manufacturing sectors.

Samsung Electronics finished marginally higher after reporting a higher profit for the third quarter compared to last year.

Australian markets ended modestly lower due to concerns about persistent core inflation in the country and the rate outlook.

The benchmark S&P/ASX 200 Index slipped 0.3 percent to 8,160.00, while the broader All Ordinaries Index closed 0.2 percent lower at 8,422.10.

Mineral Resources jumped 9.2 percent after an announcement that it has reached an oil and gas exploration deal with Gina Rinehart’s Hancock Prospecting worth up to 1.1 billion Australian dollars (US$720 million).

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index dipped 0.4 percent to 12,638.90 ahead of earnings updates from Apple and Amazon later in the day. Taiwanese markets were shuttered due to a typhoon.

Europe

European stocks are mostly lower on Thursday, as investors assess the latest batch of earnings and the closely watched preliminary euro zone inflation reading.

Eurozone inflation accelerated more than expected in October, the flash estimate from Eurostat showed on Thursday.

The harmonized index of consumer prices posted an annual growth of 2.0 percent. Inflation was forecast to rise to 1.9 percent from 1.7 percent in September.

Core inflation that excludes energy, food, alcohol and tobacco, remained unchanged at 2.7 percent in October. The rate was seen at 2.6 percent.

Meanwhile, German retail sales unexpectedly grew in September on non-food turnover, data released by Destatis showed earlier today.

Retail turnover increased 1.2 percent on a monthly basis in September, confounding expectations for a decline of 0.7 percent.

On a yearly basis, retail sales registered an expansion of 3.8 percent, which was stronger than the expected increase of 1.6 percent.

While the French CAC 40 Index is down by 0.9 percent, the U.K.’s FTSE 100 Index is down by 0.7 percent and the German DAX Index is down by 0.5 percent.

French banking major BNP Paribas has plunged after its third quarter results revealed strains in its consumer finance and car-leasing divisions.

French oil major TotalEnergies has also shown a notable move to the downside after its third quarter adjusted earnings missed estimates.

Meanwhile, British banks such as HSBC and Lloyd are moving higher after the Labour government’s first budget in nearly 15 years avoided new taxes on the banking sector.

Denmark’s Danske Bank has also shown a substantial move to the upside after raising its full-year earnings outlook.

Peer Societe Generale has also soared after posting strong quarterly results on strong revenue growth.

Airbus SE has also rallied after reaffirming its goal to deliver about 770 aircraft this year.

U.S. Economic News

The Commerce Department on Thursday released its report on U.S. personal income and spending in the month of September, which includes the Federal Reserve’s preferred readings on consumer price inflation.

The report said the personal consumption expenditures (PCE) price index rose by 0.2 percent in September after inching up by 0.1 percent in August. The modest increase matched economist estimates.

The annual rate of growth by the PCE price index slowed to 2.1 percent in September from 2.3 percent in August, which was also in line with expectations.

The Commerce Department also said the core PCE price index, which excludes food and energy prices, climbed by 0.3 percent in September after rising by 0.2 percent in August. The increase was also in line with estimates.

Meanwhile, the annual rate of growth by the core PCE price index in September was unchanged from the previous month at 2.7 percent, while economists had expected the pace of growth to slow to 2.6 percent.

The report also said personal income increased by 0.3 percent in September after rising by 0.2 percent in August. The growth matched economist estimates.

Personal spending grew by 0.5 percent in September after climbing by 0.3 percent in August. Spending was expected to rise by 0.4 percent.

With the more closely watched monthly jobs report looming, the Labor Department also released a report on Thursday showing an unexpected decline by first-time claims for U.S. unemployment benefits in the week ended October 26th.

The report said initial jobless claims fell to 216,000, a decrease of 12,000 from the previous week’s revised level of 228,000.

Economists had expected jobless claims to inch up to 230,000 from the 227,000 originally reported for the previous week.

With the unexpected decrease, jobless claims dropped to their lowest level since hitting a matching figure in the week ended May 18th.

The Labor Department said the less volatile four-week moving average also dipped to 236,500, a decrease of 2,250 from the previous week’s revised average of 238,750.

At 9:45 am ET, MNI Indicators is scheduled to release its report on Chicago-area business activity in the month of October. The Chicago business barometer is expected to inch up to 47.0 in October from 46.6 in September, but a reading below 50 would still indicate contraction.