Disappointing big tech earnings could wipe up to $300 billion in value from the biggest U.S. companies at the start of trading as investors see further signs of weakening growth in the world’s biggest economy.
U.S. equity futures edged lower Wednesday, while the dollar extended its recent decline and Treasury bond yields slumped, as investors worried that a string of grim earnings and forecasts from major American companies sparked renewed concern for the fate of the world’s biggest economy.
Weaker-than-expected earnings from Google parent Alphabet (GOOGL) – Get Alphabet Inc. Report, a softer outlook from Microsoft (MSFT) – Get Microsoft Corporation Report and a downbeat forecast on chip demand from Texas Instruments (TXN) – Get Texas Instruments Incorporated Report rounded out a trio of tech updates that point to renewed weakness in the global economy after the close of trading last night.
Further updates from toymaker Mattel (MAT) – Get Mattel Inc. Report, which cut its near-term outlook, only added to the gloom, offsetting a relatively optimistic forecast for consumer spending from Visa (V) – Get Visa Inc. Report.
Wall Street’s reaction Wednesday, however, may be more linked to action in the bond markets, as weakening growth prospects drive investors into the safety of U.S. Treasury bonds, pulling yield firmly lower in overnight trading.
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Benchmark 10-year notes were marked another 3 basis points lower at 4.061%, while 2-year notes eased to 4.42%. The U.S. dollar index, which tracks the greenback against a basket of six global currencies, fell another 0.7% in overnight trading to a three-week low of 110.204, offsetting the likely impact of big declines for Microsoft and Google, which are likely to lop nearly $300 billion from the market value of the biggest U.S. tech companies at the start of trading.
The yield and dollar pullbacks are also paring bets on another jumbo Fed rate hike in December, and while the odds of a 75 basis point move next week are locked-in at 97.5%, the chances of a follow-on move in December have fallen to 46.8%, according to the CME Group’s FedWatch, as investors grow more concerned for the broader economy’s near-term prospects.
On Wall Street, futures contracts tied to the S&P 500, which is up 7.6% for the month, are indicating a 17 point pullback while those linked to the Dow Jones Industrial Average are priced for a 10 point dip. The tech-focused Nasdaq is priced for a 195 point decline on the back of Google and Microsoft slumps.
Microsoft was marked 6.2% lower after the tech giant posted weakening growth rates in its key cloud computing division and forecast disappointing revenue gains over the final months of the year.
Alphabet fell 6% after the Google parent company posted weaker-than-expected third quarter earnings thanks to slowing ad sales growth that echoed the warning last week from messaging ap maker Snap (SNAP) – Get Snap Inc. Class A Report.
Visa (V) – Get Visa Inc. Report shares jumped higher in pre-market trading after the credit card group posted better-than-expected third quarter earnings.
Intel (INTC) – Get Intel Corporation Report shares were active in early Wednesday trading after the chipmaker said the listing of its self-driving division, Mobileye Global (MBLY) , generated better-than-expected investor interest and a higher end price.
In overseas markets, the region-wide Stoxx 600 was down 0.1% in early Frankfurt trading, while the firmer pound held down gains for the FTSE 100, which was marked 0.38% lower in London.
Overnight in Asia, stocks rebounded from their lowest levels in more than two years, following on from last night’s solid close on Wall Street, with the region-wide MSCI ex-Japan index marked 1.2% higher heading into the close of trading. Japan’s Nikkei 225 gained 0.67%.
