In the evening trading session on Tuesday, U.S. stock index futures experienced a decline as concerns regarding prolonged higher interest rates gained traction ahead of the Federal Reserve’s meeting conclusion later in the day.
Investors were greeted with mixed signals from Amazon.com Inc’s earnings report. While the e-commerce and tech giant reported stronger earnings driven by artificial intelligence demand for cloud computing, it also forecasted increased costs, which contributed to the market’s uncertainty.
S&P 500 Futures dropped by 0.2% to reach 5,055.00 points, while Nasdaq 100 Futures fell by 0.4% to 17,494.75 points by 19:53 ET (23:53 GMT). Dow Jones Futures experienced a slight decline of 0.1% to 37,961.0 points.
This downward trend in futures mirrored the subdued performance observed during the trading session on Wall Street, where fears related to the Federal Reserve’s actions prompted traders to take profits, particularly in the technology sector.
Market participants widely anticipated that the Federal Reserve would maintain interest rates at the conclusion of its meeting later in the day. However, Fed Chair Jerome Powell was expected to convey a hawkish outlook, given recent high inflation readings that have eroded the central bank’s confidence in rate cuts.
The release of a higher-than-expected employment cost index further fueled concerns about persistent inflation. As a result, expectations shifted, with the Fed now projected to commence rate cuts no earlier than September, if at all this year.
The potential scenario of prolonged higher interest rates poses challenges for stocks, as it restricts liquidity in the economy, which is typically channeled towards investment activities.
In response to these developments, Wall Street indexes recorded significant declines on Tuesday. The S&P 500 fell by 1.6% to close at 5,035.69 points, the NASDAQ Composite dropped by 2% to 15,657.82 points, and the Dow Jones Industrial Average sank by 1.5% to 37,815.92 points. These losses marked the end of a five-month winning streak for all three indexes.
The technology sector faced notable selling pressure, with industry giants like Microsoft Corporation, Alphabet Inc, and Tesla Inc experiencing declines ranging from 2% to 5.5% after a period of strong rallies in recent sessions. These stocks exhibited minimal movement in the aftermarket trading session.
In aftermarket trading, Amazon.com saw a 1.3% increase following its first-quarter earnings beat, although gains were tempered by a revenue forecast that fell short of expectations due to projected higher costs related to artificial intelligence spending.
On the other hand, Advanced Micro Devices Inc (AMD) witnessed a nearly 7% decline after reporting first-quarter earnings in line with expectations, along with a second-quarter forecast that met expectations. The chipmaker anticipates continued demand growth driven by increased AI development.
Meanwhile, Starbucks Corporation experienced a significant decline of nearly 12% after reporting first-quarter profit below expectations, coupled with weakened revenue attributed to declining demand in both North America and China.
The trading session reflected heightened uncertainty among investors as they awaited the Federal Reserve’s decision and navigated through mixed corporate earnings reports, highlighting the market’s sensitivity to factors influencing interest rates and corporate performance.