Microsoft, Meta Platforms Drag Down Nasdaq Futures: Markets Wrap

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(Bloomberg) -- Stocks extended declines on the busiest day of the earnings season as investors digested results from Microsoft Corp. and Meta Platforms Inc. as well as economic data that blurred the picture for Federal Reserve interest-rate cuts.

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Nasdaq 100 contracts retreated more than 1%, with Microsoft and Meta both down about 4% in pre-market trading. The slide in the two stocks combined represented half of the losses in the Nasdaq futures, according to Bloomberg calculations. Amazon Inc. and Apple Inc. are due to report today.

The “disappointing” set of results from Microsoft and Meta was hurting sentiment, said Marija Veitmane, a senior multi-asset strategist at State Street Global Markets. Investors are questioning whether the companies can sustain profit growth while ramping up spending on artificial intelligence and cloud services.

“The market is concerned with the continued increase in investments, and that is likely to weigh on stocks in the short term,” she said. “In the medium term, however, we still see weakness in tech stocks as a buying opportunity. It’s a very crowded position, so it is getting sold on any sign of disappointment, but we always see investors coming back as there’s no other alternative if you want quality.”

The dollar slipped, though it remains on pace for its best month in more than two years as investors trimmed bets on Fed policy easing after robust economic-growth and jobs data Wednesday. One-week implied volatility on the Bloomberg Dollar Spot Index rose to the highest since December 2022, indicating that traders expect wild swings in the greenback over the US presidential election.

“Yesterday’s US GDP data once more evidenced the continued ‘US exceptionalism’ theme which still underpins much of the USD’s recent strength,” said Michael Brown, a senior research strategist at Pepperstone Group Ltd. “I still find it tough to bet against the greenback in such an environment, and would be buying any pre-election USD dips.”

The two-year Treasury yield, which is most sensitive to interest-rate moves, rose to a three-month high. In addition to the resilient US economy, investors are worried that a resurgence in inflation after the US election may delay or prevent interest-rate cuts.