U.S. stock index futures witnessed a decline on Wednesday due to disappointing results from chip stocks such as Advanced Micro Devices (AMD) and Super Micro Computer (SMCI). The AI chip sales forecast from AMD fell short of investor expectations, leading to a 6.3% drop in premarket trading. Similarly, SMCI reported third-quarter revenue below estimates, causing its stock to plummet by 9.1%. The negative performance of these companies had a ripple effect on other chipmakers like Nvidia and Micron Technology, both of which experienced losses of more than 2%.
The overall market sentiment was cautious as investors awaited more economic data and the Federal Reserve’s interest rate decision scheduled for later in the day. Following a decrease in labor costs and deteriorating consumer confidence, U.S. stocks ended lower on Tuesday, contributing to a sense of uncertainty. The upcoming economic data releases, including the ADP National employment numbers for April, the S&P Global final manufacturing PMI data, the ISM manufacturing PMI data, and the JOLTS job openings figures, are expected to provide insights into the state of inflation in the U.S. economy. Moreover, the Fed’s interest rate decision at the end of its two-day meeting will be closely monitored to determine the central bank’s stance on future rate cuts.
Money markets anticipate that the Federal Reserve will maintain its current interest rates, with only about 28 basis points of rate cuts predicted for the rest of the year. This represents a significant decrease from the initial forecast of around 150 basis points at the beginning of 2024. The shift in rate cut expectations, combined with geopolitical tensions in the Middle East, resulted in a challenging month for U.S. equities in April, marking the first monthly loss in six. As the first-quarter earnings season continues and the interest rate outlook becomes clearer, the performance of U.S. stocks in May will be closely observed. Historically, the period between November and April has shown higher returns for the S&P 500 compared to the period between May and October, reinforcing the “Sell in May and Go Away” adage.
Market Movements
Amidst the uncertainty surrounding economic data and the Fed decision, Dow E-minis were down by 108 points, S&P 500 E-minis by 25.5 points, and Nasdaq 100 E-minis by 145.25 points at 05:31 a.m. ET. Starbucks witnessed a 12% drop in premarket trading after revising its annual sales forecast due to a decline in same-store sales. Conversely, Pinterest experienced an 18% surge following a strong second-quarter revenue forecast, exceeding Wall Street estimates.
The impact of economic data, rate cut expectations, and geopolitical factors is likely to influence the performance of U.S. stock index futures in the coming days. Investors should remain cautious and stay informed about key economic indicators and central bank decisions to navigate the turbulent market environment effectively.