U.S. stock-index futures moved lower before Thursday’s trading session as investors reacted to a mixed group of corporate earnings reports. Futures tied to the S&P 500 were down 0.5%, while Nasdaq-100 futures fell 1.3%. Dow Jones Industrial Average futures dropped 171 points, or 0.3%, according to CNBC.
The moves pointed to pressure on the technology and industrial sectors at the opening of trading. Alphabet shares fell 10% in premarket trading after the Google parent reported adjusted earnings per share and revenue below expectations for the third quarter. Alphabet also reported negative free cash flow of $9.07 billion, meaning its cash spending exceeded the cash generated by operations during the period.
Earnings drive the premarket moves
Caterpillar shares declined 9% before the opening bell. The heavy-equipment maker exceeded expectations for quarterly revenue and profit, but sales in its construction industries business came in slightly below forecasts. The result added pressure to the Dow futures, which are influenced by large industrial companies.
Microsoft moved in the opposite direction, gaining 2.6% in premarket trading. The software company reported better-than-expected results for its fiscal first quarter, helped by growth in its Azure cloud infrastructure business. Azure is Microsoft’s cloud-computing platform, which provides data storage and computing services to businesses and other customers.
| Security or index | Premarket move | Reported driver |
|---|---|---|
| Nasdaq-100 futures | -1.3% | Technology earnings and artificial-intelligence concerns |
| S&P 500 futures | -0.5% | Mixed corporate results |
| Dow futures | -171 points, or -0.3% | Caterpillar weakness |
| Microsoft | +2.6% | Azure growth and quarterly earnings |
Artificial-intelligence spending remains in focus
The earnings reports arrived as investors continued to reassess the companies tied to artificial-intelligence spending. The iShares Semiconductor ETF, which tracks semiconductor companies, was down more than 2% in premarket trading. The Roundhill Memory ETF fell more than 3%. Both funds had recovered in recent days after a difficult stretch through much of October.
Microsoft’s report also raised questions about the timing of spending on the infrastructure needed to support cloud and artificial-intelligence services. Microsoft’s capital-expenditures figure came in below expectations, CNBC reported, prompting declines among so-called neocloud companies, which provide specialized computing capacity for artificial-intelligence workloads.
Interest rates add another market factor
The market reaction followed the Federal Reserve’s decision on Wednesday to leave its benchmark interest-rate range at 3.75% to 4%. The pause had been widely expected. The Federal Open Market Committee said it wanted more information before taking further action and described inflation as still elevated.
“remains elevated” — Federal Open Market Committee
Higher interest rates can affect stock valuations by raising the cost of borrowing and reducing the present value investors assign to future corporate earnings. They also influence the returns available on savings products, Treasury securities and other fixed-income investments. Those links make large market moves relevant beyond the individual companies reporting results, including for households with retirement accounts or other investments tied to broad market indexes.
At 9:03 a.m. Eastern time Thursday, the available market indicators showed investors positioning for a weaker start, led by Alphabet and Caterpillar. Microsoft’s gain provided a counterweight, but it did not offset the broader pressure in futures tied to the major U.S. indexes.
