Futures for the S&P 500 and Nasdaq experienced modest gains on Thursday, buoyed by the U.S. Federal Reserve’s hints at a potential interest rate cut in September and a strong sales forecast from Meta Platforms. However, gains were tempered by declines in some major technology and semiconductor stocks.
In premarket trading, Meta Platforms saw a significant 7% increase following a strong performance in its second-quarter revenue and an optimistic third-quarter sales outlook. This has led to expectations that its investments in artificial intelligence might be financially manageable.
“Meta has effectively extended the AI narrative… investors are willing to overlook increased capital expenditures if revenue growth remains robust,” commented Kathleen Brooks, research director at XTB.
Meta’s results marked a positive turn for the “Magnificent Seven” group of tech giants, addressing investor concerns about AI spending that were sparked by disappointing earnings from Alphabet and Microsoft last month.
The broader market has been closely watching for indications that major tech companies can sustain their substantial gains, which have driven U.S. equity markets to record highs this year amidst excitement over AI advancements and anticipated rate cuts.
In premarket trading, large-cap stocks showed mixed results following Wednesday’s gains. Apple and Amazon.com saw modest increases of 0.5% and 0.9%, respectively, ahead of their earnings reports due later in the day. Conversely, Alphabet and Tesla experienced slight declines of 0.1% and 0.6%, respectively.
Nvidia, a favorite in AI investments, saw its stock rise by 0.60% following a record one-day market value increase of approximately $330 billion.
At 5:23 a.m. ET, Dow e-minis were down 18 points, or 0.04%, while S&P 500 e-minis gained 12.5 points, or 0.22%, and Nasdaq 100 e-minis rose by 62.25 points, or 0.32%.
The S&P 500 and Nasdaq enjoyed their largest single-day gains since February 22 on Wednesday, following Federal Reserve Chair Jerome Powell’s indication of a possible policy pivot towards easing in September. This move is anticipated to help inflation approach the 2% target without causing significant harm to the labor market.
As speculation about rate cuts grows, investors are now assessing whether the Fed can implement policy changes at a pace that aligns with achieving a “soft landing” for the economy.
Futures for the Russell 2000 also saw a 0.5% increase after the small-cap index posted its most substantial monthly gain in July for 2024, driven by expectations that smaller companies will benefit from a low-interest-rate environment.
Attention is now focused on economic data, including weekly jobless claims and manufacturing PMIs, scheduled for release throughout the day.
Chip stocks largely retreated following Wednesday’s rally, which saw the Philadelphia SE Semiconductor index record its largest one-day gain of 7% since November 2022. Arm Holdings experienced a notable 10.7% drop after issuing a conservative revenue forecast, while Qualcomm fell 1.9% due to a revenue impact from the revocation of an export license for Chinese telecom firm Huawei. Western Digital Corp also declined by 6.2% after projecting first-quarter revenue below estimates.
Of the 283 S&P 500 companies that have reported second-quarter earnings to date, 78.4% have surpassed expectations, according to LSEG data.
