Wall Street futures slip as tech earnings disappoint

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Wall Street futures slipped on Thursday as the high-flying technology sector was dragged down by earnings from Tesla and Netflix that underwhelmed investors.

Contracts tracking the benchmark S&P 500 fell 0.2 per cent while those tracking the tech-focused Nasdaq 100 retreated 0.8 per cent ahead of the New York open. 

The downturn came after Tesla said its profit margins slipped as a series of price cuts weighed on the carmaker’s earnings, while Netflix missed sales estimates and posted lower than expected guidance for the following quarter. Tesla shares were down 2.8 per cent in premarket trading, while lost 6.3 per cent.

Large tech companies drove much of the rally on Wall Street since the start of the year, as investors rode the wave of artificial intelligence hype and hoped that the global march higher of interest rates would soon draw to a close.

The Wall Street rally “was very tech-driven and if you look at what the rest of the market did, it was pretty flat since the beginning of the year”, said Anthi Tsouvali, multi-asset strategist at State Street Global Markets.

“We talk about this euphoria, because we are reaching new highs [ . . . ] but at the end of the day it’s driven by a very small part of the market and that is why it could be very volatile if tech earnings are not as good as everyone expected,” she added.

Stocks in Europe edged higher, helped by some upbeat mining sector earnings. The region-wide Stoxx 600 added 0.1 per cent, recouping early morning losses, while France’s Cac 40 gained 0.2 per cent and Germany’s Dax rose 0.1 per cent.

The gains came as shares of precious metals miner Anglo American rose 5 per cent, after the company reported a jump in its first-half copper production. The Stoxx 600 Basic Resources index added 2 per cent.

The increases offset the sell-off in European technology stocks, which followed after the Taiwan Semiconductor Manufacturing Company lowered its outlook for 2023, saying that enthusiasm about AI might not compensate for the overall slowdown in global demand.

Shares of Dutch chipmaker ASML slipped almost 4 per cent, even as the company reported that demand from China boosted its orders in the second quarter. ASM International was down more than 5 per cent.

Meanwhile, traders awaited economic data, with US weekly jobless claims and the eurozone’s consumer confidence indicator coming later in the day, ahead of a series of central bank policy meetings next week. 

Markets overwhelmingly expect the European Central Bank to lift its benchmark deposit rate by 0.25 percentage points to 3.75 per cent next Thursday, but are divided on whether rates will increase beyond that point following policymakers’ dovish remarks earlier in the week. 

The US Federal Reserve is expected to raise the federal funds rate by the same amount, from the current target range between 5 per cent and 5.25 per cent. But lower than expected inflation data last week suggested the Fed’s tightening campaign could also be nearing its end. 

“Central banks might finally be near the end of their current rate hiking cycle, particularly after some positive numbers on inflation over recent days,” said Henry Allen, macro strategist at Deutsche Bank.

The trend spilled over into the UK in the previous session, when official data showed inflation eased more than expected in June, bolstering bets that Bank of England policymakers would opt for a smaller rate increase at their August meeting. London’s FTSE 100 index rose 0.6 per cent.

Equities were down in Asia, with China’s benchmark CSI 300 index slipping 0.7 per cent, while Hong Kong’s Hang Seng lost 0.1 per cent.